By Robert Bianchi, Ph.D., Griffith University, Australia; Michael Drew, Ph.D., Griffith University, Australia; and John Hua Fan, Ph.D., Griffith University, Australia
As summarized by Ana-Maria Fuertes, Ph.D., Professor in Finance and Econometrics, Cass Business School, City, University of London, U.K. and Member of the GCARD’s Editorial Advisory Board
This article investigates the 52-week-high momentum trading strategy in commodity futures markets. The paper’s empirical analysis suggests that this behavioral-finance-motivated strategy generates significant profits after accounting for transaction costs, and outperforms the conventional momentum strategy. They further demonstrate that the 52-week-high momentum returns are significantly linked not only to the term structure and hedging pressure risk factors that reflect the inexorable contango and backwardation cycle but also to the TED spread that proxies for global liquidity risk.