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Revisiting time series momentum in China's commodity futures market: Evidence on sources of momentum profits

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  • Ming, Lei
  • Song, Wuqi
  • Dong, Minyi

Abstract

Time series momentum (TSM) is a well-documented market anomaly existing in various financial markets, yet few studies clarify the TSM in China's commodity futures market from the lens of sources of momentum profits. Based on the Nanhua commodity index, this study exploits the pooled regression and empirically identifies TSM in Chinese commodity futures market, particularly for investment strategies with a 1-month look-back period. The most significant predictability of the following month's returns comes from the past month's returns. The TSM is a superior investment strategy in China's commodity futures market. It outperforms the time series history strategy that does not require predictability, the cross-sectional momentum, and buy-and-hold strategies in terms of cumulative and risk-adjusted excess returns. Notably, the mechanisms of shorting futures with negative past cumulative returns and effective market timing explain the preferable profits of TSM strategy.

Suggested Citation

  • Ming, Lei & Song, Wuqi & Dong, Minyi, 2023. "Revisiting time series momentum in China's commodity futures market: Evidence on sources of momentum profits," Economic Modelling, Elsevier, vol. 128(C).
    • Handle: RePEc:eee:ecmode:v:128:y:2023:i:c:s0264999323003346
    DOI: 10.1016/j.econmod.2023.106522
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