Can Economic Factors Improve Momentum Trading Strategies? The Case of Managed Futures during the COVID-19 Pandemic

Guobužaitė, Renata and Teresienė, Deimantė (2021) Can Economic Factors Improve Momentum Trading Strategies? The Case of Managed Futures during the COVID-19 Pandemic. Economies, 9 (2). p. 86. ISSN 2227-7099

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Abstract

Systematic momentum trading is a prevalent risk premium strategy in different portfolios. This paper focuses on the performance of the managed futures strategy based on the momentum signal across different economic regimes, focusing on the COVID-19 pandemic period. COVID-19 had a solid but short-lived impact on financial markets, and therefore gives a unique insight into momentum strategies’ performance during such critical moments of market stress. We offer a new approach to implementing momentum strategies by adding macroeconomic variables to the model. We test a managed futures strategy’s performance with a well-diversified futures portfolio across different asset classes. The research concludes that constructing a portfolio based on academically/economically sound momentum signals with its allocation timing based on broader economic factors significantly improves managed futures strategies and adds significant diversification benefits to the investors’ portfolios.

Item Type: Article
Subjects: AP Academic Press > Multidisciplinary
Depositing User: Unnamed user with email support@apacademicpress.com
Date Deposited: 24 Jun 2023 06:25
Last Modified: 22 Jun 2024 08:53
URI: http://info.openarchivespress.com/id/eprint/1651

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