Exploiting commodity momentum along the futures curves |
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Institution: | 1. Nottingham University Business School, University of Nottingham, Nottingham NG8 1BB, United Kingdom;2. Essex Business School, University of Essex, Colchester CO4 3SQ, United Kingdom |
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Abstract: | This study examines novel momentum strategies in commodities futures markets that incorporate term-structure information. We show that momentum strategies that invest in contracts on the futures curve with the largest expected roll-yield or the strongest momentum earn significantly higher risk-adjusted returns than a traditional momentum strategy, which only invests in the nearest contracts. Moreover, when incorporating conservative transaction costs we observe that our low-turnover momentum strategy more than doubles the net return compared to a traditional momentum strategy. |
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Keywords: | Commodity futures Momentum Term structure Futures curve Roll yield Transaction costs |
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