Swing Trading Signals


Since 2013

  • 100% Quantified, data-driven and Backtested
  • We always show our results!
  • Signals every day via our site or email
  • Cancel at any time!

Commodity Strategies Based on Momentum, Term Structure and Idiosyncratic Volatility

Last Updated on 10 February, 2024 by Rejaul Karim

The research article “Commodity Strategies Based on Momentum, Term Structure and Idiosyncratic Volatility” by Ana-Maria Fuertes, Joëlle Miffre, and Adrian Fernandez-Perez presents an innovative approach derived from non-overlapping momentum, term structure, and idiosyncratic volatility signals in commodity futures markets.

Their novel triple-screen strategy, which involves buying contracts with high past performance, high roll-yields, and low idiosyncratic volatility while simultaneously shorting contracts with poor past performance, low roll-yields, and high idiosyncratic volatility, emerges as a compelling investment approach.

Over the 1985 to 2011 period, this triple-screen strategy significantly outperforms the S&P-GSCI, boasting a Sharpe ratio five times higher. Notably, the strategy’s superiority remains robust, unattributable to overreaction, liquidity risk, transaction costs, or the financialization of commodity futures markets.

This pioneering blend of momentum, term structure, and idiosyncratic volatility signals offers a promising avenue for enhancing commodity futures investment strategies, challenging conventional wisdom and yielding valuable implications for market participants and researchers alike.

Abstract Of Paper

This article demonstrates that momentum, term structure and idiosyncratic volatility signals in commodity futures markets are not overlapping which inspires a novel triple-screen strategy. We show that simultaneously buying contracts with high past performance, high roll-yields and low idiosyncratic volatility, and shorting contracts with poor past performance, low roll-yields and high idiosyncratic volatility yields a Sharpe ratio over the 1985 to 2011 period which is five times that of the S&P-GSCI. The triple-screen strategy dominates the double-screen and individual strategies and this outcome cannot be attributed to overreaction, liquidity risk, transaction costs or the financialization of commodity futures markets.

Original paper – Download PDF

Here you can download the PDF and original paper of Commodity Strategies Based on Momentum, Term Structure and Idiosyncratic Volatility.

(An option to download will come shortly)

Author

Ana-Maria Fuertes
Bayes Business School, City, University of London

Joëlle Miffre
Audencia Business School

Adrian Fernandez-Perez
Auckland University of Technology

Conclusion

In conclusion, the study “Commodity Strategies Based on Momentum, Term Structure and Idiosyncratic Volatility” by Ana-Maria Fuertes, Joëlle Miffre, and Adrian Fernandez-Perez underscores the non-overlapping nature of momentum, term structure, and idiosyncratic volatility signals in commodity futures markets, inspiring the development of a potent triple-screen strategy.

The unprecedented success of this strategy, demonstrated by the substantial outperformance of the S&P-GSCI with a Sharpe ratio five times higher over the 1985 to 2011 period, solidifies its dominance over double-screen and individual strategies.

Importantly, this exceptional outcome stands robust against overreaction, liquidity risk, transaction costs, and market financialization, reaffirming the distinct efficacy and resilience of this innovative approach.

This pioneering blend of momentum, term structure, and idiosyncratic volatility signals not only challenges conventional investment wisdom but also offers valuable insights for enhancing commodity futures investment strategies, ultimately enriching the repertoire of market participants and researchers.

Related Reading:

Factor Based Commodity Investing

Idiosyncratic Momentum in Commodity Futures

FAQ

What is the main focus of the research article “Commodity Strategies Based on Momentum, Term Structure and Idiosyncratic Volatility”?

The main focus of the research article is to explore the non-overlapping nature of momentum, term structure, and idiosyncratic volatility signals in commodity futures markets. The authors aim to develop a novel triple-screen strategy that incorporates these signals to create a compelling investment approach.

What is the triple-screen strategy proposed in the study?

The triple-screen strategy involves simultaneously buying contracts with high past performance, high roll-yields, and low idiosyncratic volatility, while shorting contracts with poor past performance, low roll-yields, and high idiosyncratic volatility. This strategy is designed to leverage the non-overlapping signals from momentum, term structure, and idiosyncratic volatility.

What is the period covered in the study, and how does the triple-screen strategy perform during that time frame?

The study covers the period from 1985 to 2011. During this time frame, the triple-screen strategy significantly outperforms the S&P-GSCI, boasting a Sharpe ratio five times higher. The strategy’s superior performance is a key highlight of the study.

Get All Stocks And Equities Research Papers Strategies here

Leave a Reply

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Monthly Trading Strategy Club

$42 Per Strategy

>

Login to Your Account



Signup Here
Lost Password