Commodity momentum decomposition

This study decomposes the momentum factor (MOM) in the commodity futures market. A high-to-price (HTP) factor generates a higher Sharpe ratio than a price-to-high (PTH) factor. We uncover that the profitability mechanisms across three momentum factors are different. The positive returns on MOM and PTH are associated with overconfidence and strong self-attribution. In contrast, HTP is linked to investors’ underreaction and the information diffusion process. Moreover, we find that positive demand shocks raise the return on HTP.

This is the peer reviewed version of the following article: [Iwanaga, Y., & Sakemoto, R. (2022). Commodity momentum decomposition. Journal of Futures Markets, 1– 19.], which has been published in final form at [ https://doi.org/10.1002/fut.22382]. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. This article may not be enhanced, enriched or otherwise transformed into a derivative work, without express permission from Wiley or by statutory rights under applicable legislation. Copyright notices must not be removed, obscured or modified. The article must be linked to Wiley’s version of record on Wiley Online Library and any embedding, framing or otherwise making available the article or pages there of by third parties from platforms, services and websites other than Wiley Online Library must be prohibited.

This fulltext is available in Oct. 2024.