Momentum Strategies in Commodity Futures Markets

34 Pages Posted: 20 Apr 2005 Last revised: 10 Nov 2015

Joëlle Miffre

EDHEC Business School

Georgios Rallis

City University of London - Sir John Cass Business School

Multiple version iconThere are 2 versions of this paper

Date Written: August 5, 2006

Abstract

The article tests for the presence of short-term continuation and long-term reversal in commodity futures prices. While contrarian strategies do not work, the article identifies 13 profitable momentum strategies that generate 9.38% average return a year. A closer analysis of the constituents of the long-short portfolios reveals that the momentum strategies buy backwardated contracts and sell contangoed contracts. The correlation between the momentum returns and the returns of traditional asset classes is also found to be low, making the commodity-based relative-strength portfolios excellent candidates for inclusion in well-diversified portfolios.

Keywords: Commodity futures, Momentum, Backwardation, Contango, Diversification

JEL Classification: G13, G14

Suggested Citation

Miffre, Joëlle and Rallis, Georgios, Momentum Strategies in Commodity Futures Markets (August 5, 2006). Journal of Banking and Finance, Vol. 31, No. 9, 2007. Available at SSRN: https://ssrn.com/abstract=702281 or http://dx.doi.org/10.2139/ssrn.702281

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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