Strategies Based on Momentum and Term Structure in Financialized Commodity Markets
DOI:
https://doi.org/10.18559/s3twv096Keywords:
Financialization, Materials market, Futures contracts, Momentum strategiesAbstract
This study attempts to answer the question of how the financialization of commodity markets affects the performance of strategies based on momentum and term-structure. The article includes an analysis of profitability from double-sorted portfolios regarding the participation of speculative traders, past returns and the shape of term spreads, tested against a multifactor risk model. Both strategies perform much better in non-financialized commodity markets, whereas in the case of financialized commodities they do not render statistically significant above-average returns. These observations could be used in tactical asset allocation and for constructing a commodity futures pricing model, which would take into account the influence of financial investors.
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