Return seasonality in commodity futures

Abstract

We examine seasonality in commodity futures markets using monthly returns for 26 commodities from 1970 through 2023. Only a few commodities in the early years show half-monthly and monthly seasonality. The same-month trading strategy proposed by Keloharju et al. (2016) outperforms the other-month strategy mostly for the subperiod 1990–1999. We then backtest the momentum strategy and momentum with a reversal strategy to compare their performance with that of a seasonality strategy. When these momentum-and-reversal strategies are combined with the seasonality strategy, the result has significant composite returns. Moreover, the seasonal effects in the commodity futures market have weakened in recent years, indicating that the market tends toward efficiency. Nevertheless, our overall results demonstrate that the effects of combination strategies persist and significantly impact the market.