Understanding momentum in commodity markets

Ielpo, Florian; Gatumel, Mathieu; Chevallier, Julien

Ielpo, Florian; Gatumel, Mathieu; Chevallier, Julien (2013), Understanding momentum in commodity markets, Applied Economics Letters, 20, 15, p. 1383-1402. http://dx.doi.org/10.1080/13504851.2013.815300

Type

Article accepté pour publication ou publié

Date

2013-10

Journal name

Applied Economics Letters

Volume

Number

Publisher

Taylor & Francis

Pages

1383-1402

Abstract (EN)

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.

Subjects / Keywords

Momentum; commodities; Markov-switching

JEL

C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
C58 - Financial Econometrics
G10 - General
Q02 - Commodity Markets