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The risk and return of active vs passive trading strategies with commodity futures

Title:

The risk and return of active vs passive trading strategies with commodity futures

Jiang, Hui (2008) The risk and return of active vs passive trading strategies with commodity futures. Masters thesis, Concordia University.

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Abstract

This paper investigates relationships between profits from dynamic trading strategies, risk premium, convenience yields, and net hedging pressures for commodity futures. The term structure of oil, gold, copper and soybeans futures markets contains predictive power for the corresponding term premium. However, only oil futures and soybean futures lead their spot premium. Significant momentum profits are identified in both outright futures and spread trading strategies when the spot premium and the term premium are used to form winner and loser portfolios. Profits from active strategies based on winner and loser portfolios are conditioned on market structure and net hedging pressure effects. Dynamic trading strategies based on contracts with extreme backwardation, extreme contango, and extreme hedging pressures are also tested. On average, spread trading outperforms outright futures trading in capturing the term structure risk and hedging pressure risk. For such strategies, long-short the long-term spread offers the greatest and most significant return and it offers the only exploitable trading profits built on the past hedging pressure.

Divisions:Concordia University > John Molson School of Business
Item Type:Thesis (Masters)
Authors:Jiang, Hui
Pagination:ix, 79 leaves : ill. ; 29 cm.
Institution:Concordia University
Degree Name:Theses (M. Sc. Admin.)
Program:John Molson School of Business
Date:2008
Thesis Supervisor(s):Switzer, L
ID Code:976344
Deposited By: Concordia University Library
Deposited On:22 Jan 2013 16:23
Last Modified:18 Jan 2018 17:42
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