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Curve momentum

Author

Listed:
  • Paschke, Raphael
  • Prokopczuk, Marcel
  • Wese Simen, Chardin

Abstract

We propose a momentum strategy that operates within commodity futures curves. The diversified curve momentum strategy generates a significantly positive average excess return and a (annualized) Sharpe ratio of 1.28. The profitability of the strategy has increased markedly in the more recent years. These excess returns are difficult to reconcile with risk based explanations, as evidenced by the significantly positive alpha after controlling for exposure to several well-known risk factors. The average excess return on the diversified curve momentum strategy remains significantly positive even after accounting for transaction costs.

Suggested Citation

  • Paschke, Raphael & Prokopczuk, Marcel & Wese Simen, Chardin, 2020. "Curve momentum," Journal of Banking & Finance, Elsevier, vol. 113(C).
    • Handle: RePEc:eee:jbfina:v:113:y:2020:i:c:s0378426619302912
    DOI: 10.1016/j.jbankfin.2019.105718
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    References listed on IDEAS

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    More about this item

    Keywords

    Behavioral; Commodities; Curve; Momentum; Term structure;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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