Volatility-managed commodity futures portfolios

Kang, Jangkoo and Kwon, Kyung Yoon (2021) Volatility-managed commodity futures portfolios. Journal of Futures Markets, 41 (2). pp. 159-178. ISSN 0270-7314 (https://doi.org/10.1002/fut.22175)

[thumbnail of Kang-Kwon-JFM-2020-Volatility-managed-commodity-futures-portfolios]
Preview
 Text. Filename: Kang_Kwon_JFM_2020_Volatility_managed_commodity_futures_portfolios.pdf
Accepted Author Manuscript
License: Strathprints license 1.0
Download (534kB)| Preview

Abstract

This paper examines whether the volatility management suggested by Moreira and Muir to improve profitability in the equity market can generate significant benefits both in-sample and out-of-sample in commodity futures markets as well. The in-sample results show the significant success of volatility management from the 12-month momentum and market portfolio, but the out-of-sample results show that volatility management fails to improve real-time performance, which indicates that in-sample results are not obtainable for real-time investors in the commodity futures markets. To understand the failure of volatility management, we perform the simulation analysis and find that a negative risk-return relation seems to play a pivotal role in addition to strong volatility persistency to make volatility management successful.

ORCID iDs

Kang, Jangkoo and Kwon, Kyung Yoon ORCID logoORCID: https://orcid.org/0000-0002-6212-8187;
CORE (COnnecting REpositories)