Commodity Strategies Based on Momentum, Term Structure and Idiosyncratic Volatility

Ana-Maria Fuertes, Joëlle Miffre, Adrian Fernandez-Perez: This article demonstrates that momentum, term structure and idiosyncratic volatility signals in commodity futures markets are not overlapping, which motivates the design of a new triplescreen strategy.

Author(s):

Ana-Maria Fuertes

Professor of Financial Econometrics, Cass Business School

Joelle Miffre

Professor of Finance, EDHEC Business School

Adrian Fernandez-Perez

Research Fellow, Universidad de Las Palmas de Gran Canaria

Over the period between January 1985 and August 2011, systematically buying contracts with high past performance, high roll-yield and low idiosyncratic volatility, while shorting contracts with poor past performance, low roll-yields and high idiosyncratic volatility generates an average Sharpe ratio that is five times that of the S&P-GSCI. The triple-screen strategy dominates each of the individual strategies and its risk-adjusted performance cannot be attributed to overreaction, liquidity risk or neglecting transaction costs.

Type: Working paper
Date: le 11/02/2013
Research Cluster : Finance

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