Research On Commodity Futures Trading Strategy Based On Momentum Effect

Based on the momentum effect in behavioral finance as the starting point, the momentum transaction strategy is to study the best momentum strategies for China’s commodity futures market. Through the comparative analysis of different observation period and holding period portfolio, choose the momentum trading strategy with the largest excess return. This paper also discusses the "week" price momentum strategy for the same period.This paper selected from January4,2008to February8,2013as the trading range, the market rate of return on selected Wenhua commodity index as a reference, choose futures varieties covering the volume of agricultural products and industrial products in the largest varieties. The traditional momentum trading strategy is applied in the commodity futures market, found that as the observation period and holding period (for a week of time units), momentum trading strategy yields decreased gradually, and momentum trading strategy that the period of observation and holding is one week achieved the highest average week return. Analysis results show that when the holding period for more than16weeks, there will be obvious reversal effect. Then we study another kind of momentum strategy--the price momentum strategy, with moving average basis, when the short-term moving average in long-term average price has upward momentum, and when the short-term moving average to wear under the long-term average price has a downward momentum. Through the analysis of historical data, the price momentum strategy can obtain very high Zhou Pingjun return.In this paper, yield characteristics of two momentum strategies and made a preliminary analysis, holds that the traditional momentum trading strategy can not be compared with the stock market risk compensation to explain, and income and cultural commodity index this strategy yields negative correlation. From long and short yields profit trend can use investors underreact or overreact to explain. The trend of market prices of large price momentum strategy of income derived from the large commodity bull and bear market and bring some plate trend, industrial products due to the macro economic ties, a longer cycle fluctuations in prices, often appear a large trend of more than1years, but the trend is less plate market. Agricultural products affected by weather conditions and constraints of natural conditions, changes in supply and demand will occur regularly in a year, so the market plate trend of3-4months is common, and the market trend of more large-scale long-term is less.This paper has three main innovations:Firstly, compared with the previous study on momentum effect of futures market and the momentum strategy articles, this paper has a more comprehensive and update transaction data, and makes analysis on momentum strategies are more close to the actual. Secondly, at the same time, in the traditional momentum strategies research, also study the price momentum strategy, and the two results are compared. Thirdly, through the empirical analysis of the results, proves some laws and phenomena exist in the commodity futures market.