Exploiting Commodity Momentum Along the Futures Curves

51 Pages Posted: 23 Aug 2014

See all articles by Wilma de Groot

Wilma de Groot

Robeco Asset Management

Dennis Karstanje

Erasmus University Rotterdam; Tinbergen Institute

Weili Zhou

Robeco Asset Management

Date Written: May 21, 2014

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.

Keywords: commodity futures, momentum, term structure, futures curve, roll yield, backwardation, contango, transaction costs

JEL Classification: G11, G13, G14

Suggested Citation

de Groot, Wilma and Karstanje, Dennis and Zhou, Weili, Exploiting Commodity Momentum Along the Futures Curves (May 21, 2014). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2485314

Wilma De Groot

Robeco Asset Management ( email )

Rotterdam, 3011 AG
Netherlands
+31 10 224 3107 (Phone)

Dennis Karstanje (Contact Author)

Erasmus University Rotterdam ( email )

HOME PAGE: http://www.karstanje.com

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Weili Zhou

Robeco Asset Management ( email )

Rotterdam, 3011 AG
Netherlands
+31-10-2242222 (Phone)

HOME PAGE: http://www.robeco.com/quant

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