Momentum and Reversal Strategies in Chinese Commodity Futures Markets

International Review of Financial Analysis, Volume 60, pp 177-196, October 2018, DOI: 10.1016/j.irfa.2018.09.012

40 Pages Posted: 29 Nov 2017 Last revised: 23 Oct 2018

See all articles by Yurun Yang

Yurun Yang

Xi'an Jiaotong-Liverpool Univeristy

Ahmet Goncu

Xi'an Jiaotong University (XJTU)

Athanasios A. Pantelous

Monash University - Department of Econometrics & Business Statistics

Date Written: July 20, 2018

Abstract

This paper tests a wide range of momentum and reversal strategies at different trading frequencies for the complete Chinese commodity futures market dataset. Accurate estimates of transaction costs for each commodity and the minute level futures prices are utilized to obtain the most realistic out-of-sample backtesting results. Distinctively from the existing literature, our dataset does not suffer from liquidity problems since the intra-day data is constructed from the most actively traded contracts for each and every of the 31 commodities included in our sample. Overall, there are three main findings of this study. First, momentum and reversal trading strategies can generate robust and consistent returns over time; however, the intra-day strategies can not generate sufficiently high excess returns to cover the excessive costs due to the higher frequency of trading. Second, at lower trading frequencies and longer holding periods momentum and reversal strategies can generate excess returns, but with higher maximum drawdown risk. Finally, the double-sort strategies statistically improve the performance of the trading strategies.

Keywords: Chinese commodity futures market, Momentum, Reversal, Single- and Double-sort strategies, Inter- and Intra-day frequencies

JEL Classification: G10, G15

Suggested Citation

Yang, Yurun and Goncu, Ahmet and Pantelous, Athanasios A., Momentum and Reversal Strategies in Chinese Commodity Futures Markets (July 20, 2018). International Review of Financial Analysis, Volume 60, pp 177-196, October 2018, DOI: 10.1016/j.irfa.2018.09.012, Available at SSRN: https://ssrn.com/abstract=3069253 or http://dx.doi.org/10.2139/ssrn.3069253

Yurun Yang

Xi'an Jiaotong-Liverpool Univeristy ( email )

26 Xianning W Rd.
Dushu Lake Higher Education Town
Suzhou, Jiangsu Province 215123
China

Ahmet Goncu (Contact Author)

Xi'an Jiaotong University (XJTU) ( email )

26 Xianning W Rd.
Suzhou, Jiangsu 215123
China

Athanasios A. Pantelous

Monash University - Department of Econometrics & Business Statistics ( email )

Wellington Road
Clayton, Victoria 3168
Australia

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