The alpha momentum effect in commodity markets

Adam Zaremba (), Mateusz Mikutowski, Jan Jakub Szczygielski and Andreas Karathanasopoulos

Energy Economics, 2021, vol. 93, issue C

Abstract: We are the first to document an alpha momentum effect in commodity markets. We demonstrate a strong cross-sectional relationship between future commodity returns and past alphas derived from pricing models that control for major risk factors. A strategy of going long (short) in commodities with the highest (lowest) alphas delivers economically and statistically significant payoffs and produces higher risk-adjusted returns that are approximately double the standard price momentum. Alpha momentum is not subsumed by conventional risk factors, including price momentum although price momentum is subsumed by alpha momentum. Our results are robust to numerous considerations, including alternative evaluation models, different holding periods, trading costs, subperiod analysis and alternative implementation techniques.

Keywords: Alpha momentum; Futures pricing; Commodities (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 Q11 Q13 Q41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:93:y:2021:i:c:s0140988319301902

DOI: 10.1016/j.eneco.2019.06.006

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