Exploiting the dynamics of commodity futures curves

Robert Bianchi, John Fan (), Joelle Miffre () and Tingxi Zhang ()
Additional contact information
John Fan: Griffith University [Brisbane]
Joelle Miffre: Audencia Business School
Tingxi Zhang: Curtin University

Post-Print from HAL

Abstract: The Nelson-Siegel framework is employed to model the term structure of commodity futures prices. Exploiting the information embedded in the level, slope and curvature parameters, we develop novel investment strategies that assume short-term continuation of recent parallel, slope or butterfly movements of futures curves. Systematic strategies based on the change in the slope generate significant profits that are unrelated to previously documented risk factors and can survive reasonable transaction costs. Further analysis demonstrates that the profitability of the slope strategy increases with investor sentiment and is in part a compensation for the drawdowns incurred during economic slowdowns. The profitability can also be magnified through timing and persists under alternative specifications of the Nelson-Siegel model.

Keywords: Commodity futures; Nelson-Siegel model; Slope strategy; Spread (search for similar items in EconPapers)
Date: 2023-09-01
Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-04174414v1
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Journal of Banking and Finance, 2023, 154 (106965)

Downloads: (external link)
https://audencia.hal.science/hal-04174414v1/document (application/pdf)

Related works:
Working Paper: Exploiting the dynamics of commodity futures curves (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04174414

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().