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Understanding momentum in commodity markets

Julien Chevallier, Mathieu Gatumel and Florian Ielpo ()

Applied Economics Letters, 2013, vol. 20, issue 15, 1383-1402

Abstract: This article investigates momentum strategies in commodity markets. Using a Markov-switching model and formal tests for the number of regimes in the data, we identify momentum trends for a variety of commodities, exchange rates, interest rates and equities. The data cover the period 1995--2012 at a daily frequency. The results shed light on the key differences between commodities and standard assets with regard to the presence of trends, mean-reverting behaviour and number of regimes that would need to be accurately taken into account to build profitable trend-following strategies. The results are also of economic significance for researchers interested in the modelling of commodity time series.

Date: 2013
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