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!

Exploiting Commodity Momentum Along the Futures Curves

Last Updated on 10 February, 2024 by Rejaul Karim

This research paper, “Exploiting Commodity Momentum Along the Futures Curves,” presents a comprehensive analysis of innovative momentum strategies in commodities futures markets that integrate crucial term-structure information.

Authored by Wilma de Groot, Dennis Karstanje, and Weili Zhou, the study reveals the significant impact of momentum strategies that strategically invest in futures curve contracts with the highest expected roll-yield or most robust momentum. The findings highlight these strategies’ capacity to yield markedly higher risk-adjusted returns compared to traditional approaches focusing solely on the nearest contracts.

Notably, even after accounting for conservative transaction costs, the low-turnover momentum strategy showcases an impressive doubling of the net return, effectively underscoring its potential to enhance performance in commodity futures markets.

Abstract Of Paper

This study examines novel momentum strategies in commodities futures markets that incorporate term-structure information. We show that momentum strategies that invest in contracts on the futures curve with the largest expected roll-yield or the strongest momentum earn significantly higher risk-adjusted returns than a traditional momentum strategy, which only invests in the nearest contracts. Moreover, when incorporating conservative transaction costs we observe that our low-turnover momentum strategy more than doubles the net return compared to a traditional momentum strategy.

Original paper – Download PDF

Here you can download the PDF and original paper of Exploiting Commodity Momentum Along the Futures Curves.

(An option to download will come shortly)

Author

Wilma de Groot
Robeco Asset Management

Dennis Karstanje
Erasmus University Rotterdam; Tinbergen Institute

Weili Zhou
Robeco Asset Management

Conclusion

In conclusion, the research on “Exploiting Commodity Momentum Along the Futures Curves” has shed light on the remarkable potential of momentum strategies that leverage term-structure information in commodities futures markets.

The findings underscore the substantial risk-adjusted returns achievable through strategic investment in futures curve contracts with the highest expected roll-yield or robust momentum, surpassing the performance of traditional approaches focused solely on the nearest contracts.

Notably, the low-turnover momentum strategy, even after factoring in conservative transaction costs, stands out for more than doubling the net return compared to traditional strategies.

This compelling demonstration of enhanced performance reinforces the viability of integrating term-structure considerations into momentum strategies, offering valuable insights for optimizing investment approaches in commodity futures markets.

Related Reading:

Chrilly’s Toolbox of Energy Futures Trading

Double-Sort Trading Strategy on Commodity Futures: Performance Evaluation and Stop-Loss Implementation

FAQ

What is the main focus of the research paper on “Exploiting Commodity Momentum Along the Futures Curves”?

The main focus of the research paper is to analyze innovative momentum strategies in commodity futures markets that incorporate term-structure information. Specifically, the authors investigate momentum strategies that strategically invest in futures curve contracts with the largest expected roll-yield or the strongest momentum, comparing their performance to traditional momentum strategies that focus solely on the nearest contracts.

What are the key findings regarding the impact of momentum strategies incorporating term-structure information?

The study finds that momentum strategies that integrate term-structure information by investing in contracts with the largest expected roll-yield or the strongest momentum generate significantly higher risk-adjusted returns compared to traditional momentum strategies. This highlights the importance of considering term-structure dynamics in commodity futures markets when designing momentum-based investment strategies.

How does the low-turnover momentum strategy perform in terms of net return after factoring in transaction costs?

Even after incorporating conservative transaction costs, the low-turnover momentum strategy demonstrates impressive performance by more than doubling the net return compared to traditional momentum strategies. This suggests that the strategic integration of term-structure information not only enhances risk-adjusted returns but also proves to be cost-effective, making it a compelling approach for investors in commodity futures markets.

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