City Research Online

Abstract

This paper examines the combined role of momentum and term structure signals for the design of profitable trading strategies in commodity futures markets. 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%, our 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. The abnormal performance of the combined portfolios cannot be explained by a lack of liquidity, data mining or transaction costs.

Publication Type:	Article
Additional Information:	NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Banking & Finance. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Banking & Finance, Volume 34, Issue 10, October 2010, Pages 2530–2548, http://dx.doi.org/10.1016/j.jbankfin.2010.04.009.
Publisher Keywords:	Commodity futures; Momentum; Term structure; Double-sort strategy
Subjects:	H Social Sciences > HG Finance
Departments:	Bayes Business School > Finance
Related URLs:	Author
SWORD Depositor:	Symplectic Administrator

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