Abstract
AbstractThis 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.
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