Tactical Allocation in Commodity Futures Markets: Combining Momentum and Term Structure Signals

Ana-Maria Fuertes, Joelle Miffre, Georgios Rallis
2010 Social Science Research Network  
This is the accepted version of the paper. This version of the publication may differ from the final published version. Permanent repository link: http://openaccess.city.ac.uk/6416/ Link to published version: http://dx. Abstract This paper examines the combined role of momentum and term structure signals for the design of profitable trading strategies in commodity futures markets. With significant annualized alphas of 10.14% and 12.66% respectively, the momentum and term structure strategies
more » ... cture strategies appear profitable when implemented individually. With an abnormal return of 21.02%, our double-sort strategy that exploits both momentum and term structure signals clearly outperforms the single-sort strategies. This double-sort strategy can additionally be utilized as a portfolio diversification tool. The abnormal performance of the combined portfolios cannot be explained by a lack of liquidity, data mining or transaction costs. JEL classification: G13, G14
doi:10.2139/ssrn.1127213 fatcat:qxhp4fm63vdpphwtrbxl3t5y2q