Idiosyncratic Momentum in Commodity Futures PDF Download
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Author: Iuliia Shpak
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
This paper provides novel findings on idiosyncratic momentum in commodity futures. Momentum strategy that forms portfolios on the basis of commodity-specific returns delivers compelling investment returns which are substantially more robust and superior to total return momentum on an absolute and risk-adjusted basis. Furthermore, idiosyncratic return momentum is materially more persistent than total return momentum in that it delivers statistically significant positive returns over longer term horizons including ranking periods of up to 24 months. A set of commodity specific and equity markets inspired factors are examined. Notably, the results corroborate that hedging pressure and term structure are sources of risk premium in commodity futures. The analysis in this chapter expose that momentum in commodity futures is fundamentally different to the momentum effect in equity markets. Specifically, momentum in commodity futures is entirely attributed to the momentum effect in long-only portfolios whilst none of the short-only strategies' returns are either profitable or statistically significant. Lastly, the two types of long-only momentum significantly outperform a passive investing into a broad market index such as S&P GSCI.
Author: Iuliia Shpak
Publisher:
ISBN:
Category :
Languages : en
Pages : 24
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Book Description
This paper provides novel findings on idiosyncratic momentum in commodity futures. Momentum strategy that forms portfolios on the basis of commodity-specific returns delivers compelling investment returns which are substantially more robust and superior to total return momentum on an absolute and risk-adjusted basis. Furthermore, idiosyncratic return momentum is materially more persistent than total return momentum in that it delivers statistically significant positive returns over longer term horizons including ranking periods of up to 24 months. A set of commodity specific and equity markets inspired factors are examined. Notably, the results corroborate that hedging pressure and term structure are sources of risk premium in commodity futures. The analysis in this chapter expose that momentum in commodity futures is fundamentally different to the momentum effect in equity markets. Specifically, momentum in commodity futures is entirely attributed to the momentum effect in long-only portfolios whilst none of the short-only strategies' returns are either profitable or statistically significant. Lastly, the two types of long-only momentum significantly outperform a passive investing into a broad market index such as S&P GSCI.
Author: Ana-Maria Fuertes
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
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Book Description
This article demonstrates that momentum, term structure and idiosyncratic volatility signals in commodity futures markets are not overlapping which inspires a novel triple-screen strategy. We show that simultaneously buying contracts with high past performance, high roll-yields and low idiosyncratic volatility, and shorting contracts with poor past performance, low roll-yields and high idiosyncratic volatility yields a Sharpe ratio over the 1985 to 2011 period which is five times that of the S&P-GSCI. The triple-screen strategy dominates the double-screen and individual strategies and this outcome cannot be attributed to overreaction, liquidity risk, transaction costs or the financialization of commodity futures markets.
Author: Dan Calder
Publisher:
ISBN:
Category : Commodity futures
Languages : en
Pages :
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Book Description
The purpose of this paper is to expand the research on momentum strategies in the securities market. Specifically, it examines the momentum anomaly in respect to the commodity futures market, and closely follows recent work as studied by Miffre and Rallis (2007). This study identifies one statistically significant short term (1 to 12 months) momentum strategy yielding a return of 7.7% a year. This return is found to be substantially higher during specific periods of the sample. The strategy?s average abnormal gain caused by the continuation of returns is shown to be robust to the risk based explanations posited by many authors of the topic. Since the risk explanations do not hold for the momentum anomaly, the alternative explanation indicates towards market inefficiency. The results from this study indicate that market inefficiency is a plausible explanation for momentum profits as realised. Specifically, the abnormal profits seem to be a consequence of irrational investor behaviour, which tends to lead to an under-reaction to new market information.
Author: Adrian Fernandez-Perez
Publisher:
ISBN:
Category :
Languages : en
Pages : 30
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Book Description
This article investigates the relationship between expected returns and past idiosyncratic volatility in commodity futures markets. Measuring the idiosyncratic volatility of 27 commodity futures contracts with traditional pricing models that fail to account for backwardation and contango leads to the puzzling finding that idiosyncratic volatility is significantly negatively priced cross-sectionally. However, idiosyncratic volatility is not priced when the phases of backwardation and contango are suitably factored in the pricing model. A time-series portfolio analysis similarly suggests that failing to recognize the fundamental risk associated with the inexorable phases of backwardation and contango leads to overstated profitability of the idiosyncratic volatility mimicking portfolios.
Author: Joëlle Miffre
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ISBN:
Category :
Languages : en
Pages :
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Book Description
The article tests for the presence of short-term continuation and long-term reversal in commodity futures prices. While contrarian strategies do not work, the article identifies 13 profitable momentum strategies that generate 9.38% average return a year. A closer analysis of the constituents of the long-short portfolios reveals that the momentum strategies buy backwardated contracts and sell contangoed contracts. The correlation between the momentum returns and the returns of traditional asset classes is also found to be low, making the commodity-based relative-strength portfolios excellent candidates for inclusion in well-diversified portfolios.
Author: Michael Beck
Publisher:
ISBN:
Category :
Languages : en
Pages : 140
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Author: Andrew Urquhart
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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Book Description
This paper investigates the performance of three different trading strategies - Jegadeesh and Titman (1993), George and Hwang (2004) and Gatev, Goetzmann and Rouwenhorst (2006) - in 29 commodity futures from January 1979 to October 2017. We find there is no significant reversal profit across 189 formation-holding windows for all the three strategies. However, there are statistical and economically significant momentum profits, and the profitability increases with the rising of formation-holding periods. The strategy of inversing the conventional Gatev, Goetzmann and Rouwenhorst (2006) is more profitable than the other two momentum strategies on a risk-adjusted basis; but the superiority declines sharply since 1998. Momentum returns are quite sensitive to market conditions but the crash of momentum returns are partly predictable. Return seasonality, risk and herding also provide partial explanation of the momentum profits.
Author: Samuel Rollier
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Category :
Languages : en
Pages :
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Author: Hoon Cho
Publisher:
ISBN:
Category :
Languages : en
Pages : 29
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Book Description
This study examines time-series momentum in the Chinese commodity futures market. The findings show that a time-series momentum strategy performs best with a one-month look-back period and a one-month holding period. Furthermore, this strategy outperforms passive long and cross-sectional momentum strategies in the Chinese futures market based on Sharpe ratios, risk-adjusted excess returns, and cumulative returns. But highly volatile market characteristic with many speculative investors limits the period in which time-series momentum is maintained. Our findings suggest that the anomaly is observed in international asset markets, including Chinese commodity futures, and support the implication that speculators profit from time-series momentum strategy is the expense of hedgers.
Author: Wilma de Groot
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
This study examines novel momentum strategies in commodities futures markets that incorporate term-structure information. We show that momentum strategies that invest in contracts on the futures curve with the largest expected roll-yield or the strongest momentum earn significantly higher risk-adjusted returns than a traditional momentum strategy, which only invests in the nearest contracts. Moreover, when incorporating conservative transaction costs we observe that our low-turnover momentum strategy more than doubles the net return compared to a traditional momentum strategy.
