Article Information
Journal: Business and Economics Research Journal
Title of Article: Strategies Based on Momentum and Term Structure in Financialized Commodity Markets
Author(s): Adam Zaremba
Volume: 7
Number: 1
Year: 2016
Page: 31-46
ISSN: 1309-2448
DOI Number: 10.20409/berj.2016116803
The aim of this paper is to investigate the impact of the financialization of commodity markets on the profitability of strategies based on momentum and term structure. The performance of an array of portfolios from double-sorts on non-commercial traders’ participation, historical returns and term spreads are tested against a risk model. The analysis covers the listing of 26 commodities in the period 1986 – 2013. First and foremost, the paper provides a fresh evidence for the validity of strategies based on momentum and term structure investing in commodity markets. Secondly, it proves that term structure strategies generate significantly higher performance results in non-financialized markets. Moreover, it supports the thesis that market financialization adversely affects momentum profits. The results are important in terms of tactical and strategic asset allocation in commodity markets. They imply that investors who implement momentum or term structure based strategies should also consider the composition of market participants.
Keywords: Commodity Futures, Commodity Markets, Financialization, Momentum, Term Structure, Backwardation, Contango, Double-Sort Strategy
JEL Classification: G11, G13, Q02

https://www.berjournal.com/wp-content/plugins/downloads-manager/img/icons/pdf.gif Full Text