How about selling commodity futures losers?

Jangkoo Kang and Kyung Yoon Kwon

Journal of Futures Markets, 2019, vol. 39, issue 12, 1489-1514

Abstract: This paper explores the benefits of extending the investment universe to commodity futures, from the perspective of momentum traders. We find that the growth‐optimal portfolio includes negative (positive) weights on commodity futures losers (stock winners). Motivated by this finding, we construct a joint momentum strategy, buying stock winners and selling commodity futures losers, and show that it generates an average monthly return of up to 1.91% and provides much lower skewness (0.04) and kurtosis (1.27) than a traditional stock momentum strategy. It also greatly improves profitability, especially in unfavorable market states, and thus effectively manages tail risk.

Date: 2019
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