Factor Based Commodity Investing

95 Pages Posted: 2 Jul 2018 Last revised: 16 Apr 2020

See all articles by Athanasios Sakkas

Athanasios Sakkas

Athens University of Economics and Business - Department of Accounting and Finance

Nikolaos Tessaromatis

EDHEC BUSINESS SCHOOL

Date Written: March 2020

Abstract

A multi-factor commodity portfolio combining the momentum, basis, basis-momentum, hedging pressure and value commodity factor portfolios outperforms significantly, economically and statistically, widely used commodity benchmarks. We find evidence that a variance timing strategy applied to commodity factor portfolios generates timing gains for the commodity momentum factor but not the other commodity factors. Dynamic commodities strategies based on commodity factor return prediction models provide little value added.

Keywords: Commodities, Factor Premia, Momentum, Basis, Basis-Momentum, Variance Timing, Commodity Return Predictability

JEL Classification: G11, G12

Suggested Citation

Sakkas, Athanasios and Tessaromatis, Nikolaos, Factor Based Commodity Investing (March 2020). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3178371 or http://dx.doi.org/10.2139/ssrn.3178371

Athanasios Sakkas (Contact Author)

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Nikolaos Tessaromatis

EDHEC BUSINESS SCHOOL ( email )

10 fleet place
london, ec4m7rb
United Kingdom

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