Abstract

http://ssrn.com/abstract=1127213
 
 

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


Ana-Maria Fuertes


Cass Business School, City University London

Joelle Miffre


EDHEC Business School

Georgios Rallis


City University of London - Sir John Cass Business School

April 22, 2010

Journal of Banking and Finance 34, 2530-2548

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%, 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.

Number of Pages in PDF File: 48

Keywords: Commodity Futures, Momentum, Term Structure, Backwardation, Contango, Double-sort strategy

JEL Classification: G13, G14

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Date posted: April 30, 2008 ; Last revised: December 19, 2013

Suggested Citation

Fuertes, Ana-Maria and Miffre, Joelle and Rallis, Georgios, Tactical Allocation in Commodity Futures Markets: Combining Momentum and Term Structure Signals (April 22, 2010). Journal of Banking and Finance 34, 2530-2548 . Available at SSRN: http://ssrn.com/abstract=1127213 or http://dx.doi.org/10.2139/ssrn.1127213

Contact Information

Ana-Maria Fuertes
Cass Business School, City University London ( email )
London, EC2Y 8HB
Great Britain
HOME PAGE: http://www.cass.city.ac.uk/experts/A.fuertes/
Joelle Miffre (Contact Author)
EDHEC Business School ( email )
58 rue du Port
Lille, 59046
France
Georgios Rallis
City University of London - Sir John Cass Business School ( email )
106 Bunhill Row
e-mail: g.rallis@city.ac.uk
London, EC1Y 8TZ
United Kingdom
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