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Exploiting commodity momentum along the futures curves

Author

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  • de Groot, Wilma
  • Karstanje, Dennis
  • Zhou, Weili

Abstract

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.

Suggested Citation

  • de Groot, Wilma & Karstanje, Dennis & Zhou, Weili, 2014. "Exploiting commodity momentum along the futures curves," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 79-93.
  • Handle: RePEc:eee:jbfina:v:48:y:2014:i:c:p:79-93
    DOI: 10.1016/j.jbankfin.2014.08.008
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    References listed on IDEAS

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    Cited by:

    1. Han, Yufeng & Hu, Ting & Yang, Jian, 2016. "Are there exploitable trends in commodity futures prices?," Journal of Banking & Finance, Elsevier, vol. 70(C), pages 214-234.
    2. repec:eee:finana:v:58:y:2018:i:c:p:52-68 is not listed on IDEAS
    3. Miffre, Joëlle, 2016. "Long-short commodity investing: A review of the literature," Journal of Commodity Markets, Elsevier, vol. 1(1), pages 3-13.

    More about this item

    Keywords

    Commodity futures; Momentum; Term structure; Futures curve; Roll yield; Transaction costs;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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