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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):
Professor of Financial Econometrics, Cass Business School
Professor of Finance, EDHEC Business School
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 |
| Extra information : |
For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ] |
| Research Cluster : | Finance |
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About EDHEC
Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC is one of the top 15 European business schools. Fully international and directly connected to the business world, EDHEC is a school for business, rather than a business school, where excellence in teaching and research focuses on innovation to stimulate entrepreneurship and creativity. For business from birth and dedicated to business, EDHEC makes entrepreneurs for life, able to remodel or create successful businesses wherever they work.
EDHEC functions as a genuine laboratory of ideas and produces innovative solutions valued by businesses. The School’s teaching philosophy, inspired by its award-winning research activities, focuses on “learning by doing”.
