Commodities momentum

A behavioral perspective

Robert J. Bianchi, Michael E. Drew, John Hua Fan*

*Corresponding author for this work

Research output: Contribution to journalArticle

8 Citations (Scopus)

Abstract

The growth in commodity-related investments has sparked interest in the performance of momentum strategies in these markets. This paper introduces a behavioral proxy of the 52-week high and low momentum that explains a significant proportion of the variation of conventional momentum returns after controlling for commodity specific risk factors. Our findings show that the 52-week high strategy generates significant profits after accounting for transaction costs. We report that the 52-week high strategy is a better predictor of returns than conventional momentum. Our findings suggest that term structure and hedging pressure risk factors provide only a partial explanation of the results.

Original languageEnglish
Pages (from-to)133-150
Number of pages18
JournalJournal of Banking and Finance
Volume72
DOIs
Publication statusPublished - 1 Nov 2016
Externally publishedYes

Keywords

  • 52-week high momentum
  • Adaptive markets
  • Conservatism
  • Hedging pressure
  • Liquidity
  • Term structure

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