This paper studies optimal calendar spreads in commodity futures markets while taking into account a stochastic convenience yield. We show that a convenience yield imperfectly correlated with the spot commmodity price results in an optimal strategy composed of two commodity futures contracts....

In a seminal article, Samuelson (1965) [Samuelson, P. A. (1965), “Proof that properly anticipated prices fluctuate randomly,” Industrial Management Review 6, 41–49.] proposes the maturity effect that the volatility of futures prices should increase as futures contract approaches maturity....

Term premiums, defined as the excess return of long-dated contracts over short-dated contracts, in commodity futures are strongly predictable, both in the time series and in the cross section, by roll yield spreads. Strategies that exploit this predictability show sizable Sharpe ratios and are...

This paper analyzes the relation between commodity spot, forward prices, and convenience yield under incomplete markets. We model a maximization profit model of a firm that uses input commodities in order to produce output commodities while storing spot commodities and trading forward to hedge...

This paper studies the trading behavior of different types of traders in commodity futures and their impact on liquidity consumption/provision as well as price discovery in the market. CME classifies each trade by its Customer Type Indicator (CTI) into four groups: a local trader who trades for...

We analyze the variance risk of commodity markets. We construct synthetic variance swaps and find significantly negative realized and expected variance swap payoffs in most markets. We find evidence of commonalities among the realized payoffs of commodity variance swaps. We also document...

This paper investigates the performance of three different trading strategies – Jegadeesh and Titman (1993), George and Hwang (2004) and Gatev, Goetzmann and Rouwenhorst (2006) – in 29 commodity futures from January 1979 to October 2017. We find there is no significant reversal profit across...

We find that commodity futures returns contain information relevant to stock market returns and macroeconomic fundamentals for a large number of countries. Commodity futures returns predict stock market returns in 59 out of 70 countries and macroeconomic fundamentals in 62 countries. This...

Using hand-collected data of commodity futures contracts going back to 1877, we replicate in the pre-sample history the well-documented cross-sectional commodity factor premia of momentum, value and basis. All three premia remain significantly positive in the additional 80-plus years of...

This study examines time-series momentum in the Chinese commodity futures market. The findings show that a time-series momentum strategy performs best with a one-month look-back period and a one-month holding period. Furthermore, this strategy outperforms passive long and cross-sectional...