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Basis-momentum strategies and ranking periods

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  • Kwon, Kyung Yoon
  • Kang, Jangkoo
  • Yun, Jaesun

Abstract

We analyze basis-momentum, the difference between the past 12 months’ momentum in first- and second-nearby futures contracts suggested by Boons and Prado (2018). Since basis-momentum is related to the slope and the curvature over the ranking period, we split the 12-month ranking period into three subperiods—the current month, the past five months, and the six months before the previous five months—and construct three basis-momentums with them. Our results show that these three basis-momentums differ substantially in predicting future returns and have different economic determinants, namely, imbalance in the supply and demand and volatility risk in financial markets.

Suggested Citation

  • Kwon, Kyung Yoon & Kang, Jangkoo & Yun, Jaesun, 2021. "Basis-momentum strategies and ranking periods," Finance Research Letters, Elsevier, vol. 43(C).
    • Handle: RePEc:eee:finlet:v:43:y:2021:i:c:s1544612321000787
    DOI: 10.1016/j.frl.2021.101997
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    More about this item

    Keywords

    Commodity futures; Basis; Momentum; Basis-momentum; Term structure;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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