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Understanding momentum in commodity markets

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  • Julien Chevallier
  • Mathieu Gatumel
  • Florian Ielpo

Abstract

This article investigates momentum strategies in commodity markets. Using a Markov-switching model and formal tests for the number of regimes in the data, we identify momentum trends for a variety of commodities, exchange rates, interest rates and equities. The data cover the period 1995--2012 at a daily frequency. The results shed light on the key differences between commodities and standard assets with regard to the presence of trends, mean-reverting behaviour and number of regimes that would need to be accurately taken into account to build profitable trend-following strategies. The results are also of economic significance for researchers interested in the modelling of commodity time series.

Suggested Citation

  • Julien Chevallier & Mathieu Gatumel & Florian Ielpo, 2013. "Understanding momentum in commodity markets," Applied Economics Letters, Taylor & Francis Journals, vol. 20(15), pages 1383-1402, October.
    • Handle: RePEc:taf:apeclt:v:20:y:2013:i:15:p:1383-1402
    DOI: 10.1080/13504851.2013.815300
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    Cited by:

    1. Mariya Gubareva & Benjamin Keddad, 2022. "Emerging markets financial sector debt: A Markov‐switching study of interest rate sensitivity," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 3851-3863, October.
    2. Baur, Dirk G. & Dichtl, Hubert & Drobetz, Wolfgang & Wendt, Viktoria-Sophie, 2020. "Investing in gold – Market timing or buy-and-hold?," International Review of Financial Analysis, Elsevier, vol. 71(C).
    3. Benjamin R. Auer, 2021. "Have trend-following signals in commodity futures markets become less reliable in recent years?," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(4), pages 533-553, December.

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