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Commodity momentum: A tale of countries and sectors

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  • Fan, John Hua
  • Qiao, Xiao

Abstract

This paper takes a cross-country and cross-sector perspective to investigate the drivers of commodity momentum strategies. Commodity momentum strategies deployed in the U.S. and Chinese markets generate positive average returns with non-negligible correlations, but their premia are primarily local, and their return characteristics are distinct. A prevalent sector effect explains a significant fraction of momentum profits in both markets, suggesting that long-short commodity futures momentum may be riskier than previously thought. Overall, our findings suggest commodity momentum is more consistent with a risk-based explanation in U.S. markets whereas risk alone is difficult to capture the premia in China.

Suggested Citation

  • Fan, John Hua & Qiao, Xiao, 2023. "Commodity momentum: A tale of countries and sectors," Journal of Commodity Markets, Elsevier, vol. 29(C).
    • Handle: RePEc:eee:jocoma:v:29:y:2023:i:c:s2405851323000053
    DOI: 10.1016/j.jcomm.2023.100315
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    More about this item

    Keywords

    Commodity futures; Momentum; Sectors; Inflation; China;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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