Long-Run Reversal in Commodity Returns: Insights from Seven Centuries of Evidence

54 Pages Posted: 24 Jan 2019

See all articles by Adam Zaremba

Adam Zaremba

Poznań University of Economics and Business; University of Dubai

Robert J. Bianchi

Griffith University

Mateusz Mikutowski

Poznan University of Economics and Business

Date Written: January 13, 2019

Abstract

We perform the longest study of long-run reversal in commodity returns ever conducted. Using a unique dataset of prices of 52 agricultural, industrial, and energy commodities, we examine the price behaviour for the years 1265 to 2017. The findings reveal a strong and robust long-run reversal effect. The returns of the past one to three years negatively predict subsequent performance in the cross-section of returns. The long-run reversal effect is present in both agricultural and non-agricultural commodity returns across all centuries and is independent of market states. The long-run reversal cannot be explained by macroeconomic risks. The phenomena is elevated in more volatile commodities and in periods of high return dispersion.

Keywords: long-run reversal, commodity markets, early commodity prices, long-term historical returns, mean reversion, trading strategies

JEL Classification: G10, G11, G12, G14, Q02

Suggested Citation

Zaremba, Adam and Bianchi, Robert J. and Mikutowski, Mateusz, Long-Run Reversal in Commodity Returns: Insights from Seven Centuries of Evidence (January 13, 2019). Available at SSRN: https://ssrn.com/abstract=3314834 or http://dx.doi.org/10.2139/ssrn.3314834

Adam Zaremba (Contact Author)

Poznań University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

HOME PAGE: http://adamzaremba.pl

University of Dubai ( email )

Academic City
Dubai, 14143
United Arab Emirates

HOME PAGE: http://adamzaremba.pl/

Robert J. Bianchi

Griffith University ( email )

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

Mateusz Mikutowski

Poznan University of Economics and Business ( email )

al. Niepodległości 10
Poznań, Poznań 61-875
Poland

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