Title: Active trading strategies based on momentum and term structure signals in commodity futures market: evidence from India

Authors: Ritika Jaiswal

Addresses: Department of Economics, BITS Pilani, K.K. Birla Goa Campus, NH – 17B, Zuarinagar, Sancoale, Goa-403726, India

Abstract: This research designs an active double-sort strategy which integrates both momentum and term structure signals present in the commodity futures market. By using a sample of highly traded commodity future contracts of the Indian commodity market from 2006 to 2016, this study confirms the exceptionally high abnormal profitability of the double-sort strategy. The abnormal returns of the double-sort portfolios are robust to transaction costs incurred for designing these active strategies. The application of a conditional multi-factor model and sub-sample analysis suggests that the return profile of these strategies is basically time-varying. Moreover, the low and insignificant correlation of double-sort portfolios with stocks and bonds confirms that relative strength portfolios of commodity futures can be effectively used to create a well-diversified portfolio.

Keywords: commodity futures; momentum strategy; term structure strategies; time-varying; transaction costs; India.

DOI: 10.1504/AAJFA.2021.111810

Afro-Asian Journal of Finance and Accounting, 2021 Vol.11 No.1, pp.131 - 150

Received: 18 Mar 2019
Accepted: 15 Dec 2019
Published online: 15 Dec 2020 *

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