How about selling commodity futures losers?

Jangkoo Kang, Kyung Yoon Kwon

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)

Abstract

This paper explores the benefits of extending the investment universe to commodity futures, from the perspective of momentum traders. We find that the growth-optimal portfolio includes negative (positive) weights on commodity futures losers (stock winners). Motivated by this finding, we construct a joint momentum strategy, buying stock winners and selling commodity futures losers, and show that it generates an average monthly return of up to 1.91% and provides much lower skewness (0.04) and kurtosis (1.27) than a traditional stock momentum strategy. It also greatly improves profitability, especially in unfavorable market states, and thus effectively manages tail risk.
Original languageEnglish
Pages (from-to)1489-1514
Number of pages26
JournalJournal of Futures Markets
Volume39
Issue number12
Early online date29 Aug 2019
DOIs
Publication statusPublished - 31 Dec 2019

Keywords

  • momentum
  • commodity futures
  • market anomalies
  • momentum crashes
  • tail risk

Fingerprint

Dive into the research topics of 'How about selling commodity futures losers?'. Together they form a unique fingerprint.

Cite this