Abstract
Is there momentum in commodity risk factors? To answer this question we study the performance of 15 commodity factor portfolios for the years 1986–2017. We are the first to document the strong cross-sectional relationship between past factor returns and their future payoffs. The factors with the highest (lowest) past returns continue to overperform (underperform). The strategy of buying (selling) long (short) sides of anomaly portfolios with the highest (lowest) past returns delivers an economically meaningful mean return and alpha, outperforming in these terms a benchmark equally weighting all of the factors. The results are robust to many considerations, including sorting periods, holding periods, implementation details, samples of factors, and subperiod analysis. The factor momentum is largely explained by the commodity price momentum effect.
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