Commodity Strategies Based on Momentum, Term Structure and Idiosyncratic Volatility PDF Download
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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: 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: 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: Adam Zaremba
Publisher:
ISBN:
Category :
Languages : en
Pages : 16
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Book Description
The aim of this paper is to investigate the impact of the financialization of commodity markets on the profitability of strategies based on momentum and term structure. The performance of an array of portfolios from double-sorts on non-commercial traders' participation, historical returns and term spreads are tested against a risk model. The analysis covers the listing of 26 commodities in the period 1986-2013. First and foremost, the paper provides a fresh evidence for the validity of strategies based on momentum and term structure investing in commodity markets. Secondly, it proves that term structure strategies generate significantly higher performance results in non-financialized markets. Moreover, it supports the thesis that market financialization adversely affects momentum profits. The results are important in terms of tactical and strategic asset allocation in commodity markets. They imply that investors who implement momentum or term structure based strategies should also consider the composition of market participants.
Author: Ana-Maria Fuertes
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper examines the combined role of momentum and term structure signals for the design of profitable trading strategies in commodity futures markets. With significant annualized alphas of 10.14% and 12.66% respectively, the momentum and term structure strategies appear profitable when implemented individually. With an abnormal return of 21.02%, a novel double-sort strategy that exploits both momentum and term structure signals clearly outperforms the single-sort strategies. This double-sort strategy can additionally be utilized as a portfolio diversification tool. Interestingly, the abnormal performance of the double-sort portfolios cannot be explained by a lack of liquidity or data mining and is robust to transaction costs and to different specifications of the risk-return trade-off.
Author: Georgios Rallis
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
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.
Author: Thomas J. Dorsey
Publisher: John Wiley & Sons
ISBN: 0470179082
Category : Business & Economics
Languages : en
Pages : 210
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Book Description
Praise for Commodity Strategies "I have read many books on Point & Figure charting, but this is the first in its category-on the application of the time-tested methodology of Point & Figure charting, in particular, the concept of 'relative strength,' to pick outperforming commodities as well as to achieve diversification of non-correlated assets. If you are looking for a profitable and comprehensive methodology to making money from the commodity and currency markets and ETFs, look no further-you have found it. This book has it all." -Fred Tam, MPhil, CFTe, MSTA, lecturer in technical analysis at University Malaya and Open University Malaysia "Tom Dorsey is a market wizard who continues to stimulate the investor's mind. Commodity Strategies is powerful from start to finish with charts and many interesting insights. It's a clear guide for anyone looking to expand their investment horizon." -Joseph Barrato, EVP of Investment Strategies, Arrow Funds "This book and Dorsey's commodity strategies provide a much-needed, disciplined, and risk-managed framework for when and how to incorporate commodities into a portfolio. His investment methodologies along with the evolution of ETFs into alternative asset classes like commodities and currencies are a match made in heaven." -H. Bruce Bond, President and CEO, PowerShares Capital Management
Author: Adam Zaremba
Publisher: Springer
ISBN: 3319915304
Category : Business & Economics
Languages : en
Pages : 325
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Book Description
This compelling book examines the price-based revolution in investing, showing how research over recent decades has reinvented technical analysis. The authors discuss the major groups of price-based strategies, considering their theoretical motivation, individual and combined implementation, and back-tested results when applied to investment across country stock markets. Containing a comprehensive sample of performance data, taken from 24 major developed markets around the world and ranging over the last 25 years, the authors construct practical portfolios and display their performance—ensuring the book is not only academically rigorous, but practically applicable too. This is a highly useful volume that will be of relevance to researchers and students working in the field of price-based investing, as well as individual investors, fund pickers, market analysts, fund managers, pension fund consultants, hedge fund portfolio managers, endowment chief investment officers, futures traders, and family office investors.
Author: Hui Jiang
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
Author: Hamed Ghoddusi
Publisher:
ISBN:
Category :
Languages : en
Pages : 23
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Book Description
We investigate the maturity-structure of roll strategy returns in the energy futures markets. Our innovation is to report and analyze the risk/return profile, the Sharpe ratio, and the asset pricing loadings of rollover strategies based on futures contracts of the same underlying commodity but with maturities between two and 12 months. We find that a conditional rollover strategy, which takes a long position in backwardation and a short position in contango, delivers the highest Sharpe ratio for all commodities. While we don't observe a significant difference in terms of asset pricing beta for different roll positions, the Sharpe ratio tends to be higher for contracts with a shorter time to maturity. We also report some distinct patterns of maturity-structure across energy commodities. Findings of the paper have implications for managing commodity-based investments.
