Tactical Allocation in Commodity Futures Markets: Combining Momentum and Term Structure Signals

This paper examines the combined role of momentum and term structure signals for the design of profitable trading strategies in commodity futures markets.

Author(s) :

Ana-Maria Fuertes

City University London

Joelle Miffre

PhD, Professor of Finance, EDHEC Business School

Georgios Rallis

City University London

Presentation :

With significant annualized alphas of 10.14% and 12.66% respectively, the momentum and term structure strategies appear profitable when implemented individually. With an abnormal return of 21.02%, a novel double-sort strategy that exploits both momentum and term structure signals clearly outperforms the single-sort strategies. This double-sort strategy can additionally be utilized as a portfolio diversification tool. Interestingly, the abnormal performance of the double-sort portfolios cannot be explained by a lack of liquidity or data mining and is robust to transaction costs and to different specifications of the risk-return trade-off.
Pdf
Tactical Allocation in Commodity Futures Markets: Combining Momentum and Term St...
(3.29 MB)
Type : Working paper
Date : le 05/05/2008
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay, Direction de la recherche de l'EDHEC [ joanne.finlay@edhec.edu] Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

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