Factor-Based Commodity Investing

A multi-factor commodity portfolio combining the high momentum, low basis and high basismomentum commodity factor portfolios significantly, economically and statistically outperforms, widely used c ...

Author(s):

Athanasios Sakkas

Assistant Professor in Finance,
Southampton Business School, University of Southampton

Nikolaos Tessaromatis

Professor of Finance,
EDHEC Business School, EDHEC-Risk Institute

A multi-factor commodity portfolio combining the high momentum, low basis and high basismomentum commodity factor portfolios significantly, economically and statistically outperforms, widely used commodity benchmarks. We find evidence that a variance timing strategy applied to commodity factor portfolios improves the return to risk trade-off of unmanaged commodity portfolios. In contrast, dynamic commodities strategies based on commodity return prediction models provide little value added once variance timing has been applied to commodity portfolios.

Type: Working paper
Date: le 14/01/2018
Research Cluster : Finance

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