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Publication : Basu D., R. Oomen, A. Stremme - How to Time the Commodity Market
Basu D., R. Oomen, A. Stremme (Mai 2006) "How to Time the Commodity Market", EDHEC Risk Asset Management Research Centre, EDHEC Working Paper. |
Résumé
In this paper we observe that it appears possible to time commodity markets by observing the (lagged) actions of various classes of market participants. We construct long-only dynamically managed strategies that would have allowed a portfolio manager to time this commodity boom, and indeed exit the market before the recent price falls. Our findings are similar in spirit to Harvey and Erb (2006) who show that some security characteristics (such as the term structure of futures prices) and some portfolio strategies involving commodities have historically been rewarded with above-average returns. We focus on the linkages between spot and futures markets and use hedging pressure as our key predictive variable. We ask if a long-only portfolio manager investing in an equity index could have moved into copper and oil around mid 2000 just before the bursting of the " dot.com " bubble. We then examine the performance of this strategy as well of strategies initiated around 2002, until May 2006. Our base assets are the S&P, copper and oil, and we use the 1 month CD as a conditionally risk-free asset, that is the safe asset.
The predictive variables are commercial hedging pressure and nonreportable hedging pressure which have been shown to work for for timing the market (Basu, Oomen and Stremme 2006), and non-commercial hedging pressure for both copper and oil. Non commercial hedging pressure represents the positions of large speculators such as hedge funds and as such could provide valuable evidence as to where the market for the commodity is headed. Our data are at a weekly frequency from October 1992 to May 2006.
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Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.
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