Time-Varying Conditional Profitability of Momentum Strategies in Commodity Futures Market: Evidence from India

Abstract

Manuscript type: Research paperResearch aims: This study aims to provide fresh evidence on the presence of momentum profitability in the commodity futures market of India. Design/Methodology/Approach: The sample of this study consists of highly traded commodity futures contracts taken from the commodity market of India over the period of 2006-2017. This study applies the conditional multi-factor model to test the time-varying performance of the momentum strategies.Research findings: This study confirms the existence of exceptionally high abnormal momentum profitability in the commodity futures market despite the consideration of transaction costs. However, subsample analysis and the application of conditional multi-factor model suggest that momentum profits are essentially time-varying. The low and insignificant correlation of momentum portfolios with stocks and bonds confirm that the relative strength of the momentum portfolios of commodity futures are part of an effective strategy to create a welldiversified portfolio. Theoretical contribution/Originality: This study examines the timevarying conditional profitability of momentum strategies for the commodity futures market of emerging economies such as India.