A new strategy using term-structure dynamics of commodity futures

Soo-Hyun Kim and Hyoung-Goo Kang

Finance Research Letters, 2014, vol. 11, issue 3, 282-288

Abstract: The term structure of commodity futures is important information for traders and investors. Traditional term-structure strategies are static; they tend to use the slope of term structure at a given moment. Instead, our trading strategy uses the change of term structure and generates statistically significant return. It also produces significant abnormal return in excess of the traditional two factors, i.e. the returns from static-slope strategy and daily momentum. Thus, its return includes orthogonal information or excess return that standard static-slope and momentum strategies cannot explain. This suggests a novel risk factor in the asset class of commodity futures or robust trading opportunities.

Keywords: Commodity; Futures; Backwardation; Contango; Momentum; Term structure dynamic-slope strategy (search for similar items in EconPapers)
JEL-codes: G02 G11 G12 G13 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:11:y:2014:i:3:p:282-288

DOI: 10.1016/j.frl.2013.11.007

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