Momentum and mean-reversion in commodity spot and futures markets

Denis B. Chaves and Vivek Viswanathan

Journal of Commodity Markets, 2016, vol. 3, issue 1, 39-53

Abstract: We study momentum and mean-reversion strategies in commodity futures prices and their relationship to momentum and mean-reversion in commodity spot prices. We find that momentum performs well in futures markets, but not in spot markets, and that mean-reversion performs well in spot markets, but not in futures markets. A decomposition of the basis (the slope of the term-structure of futures prices) into expected risk premiums and expected changes in spot prices helps us shed some light on the different results across the futures and spot markets. Most interestingly, we find that momentum in futures prices cannot be explained by a sustained trend in spot prices.

Keywords: Commodity futures; Basis; Momentum; Mean-reversion; Trend-following; Trading strategies (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 G14 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:3:y:2016:i:1:p:39-53

DOI: 10.1016/j.jcomm.2016.08.001

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