Description
Title: Can the Economy Affect Momentum Trading Strategies? The COVID-19 Pandemic and Managed Futures: A Case Study
Abstract: A common risk premium strategy in various portfolios is systematic momentum trading. The performance of the managed futures strategy based on the momentum signal is the main focus of this paper, with a particular emphasis on the COVID-19 pandemic period. COVID-19 had a significant but transient impact on the financial markets, providing a unique window into how momentum strategies performed under such extreme market stress. By including macroeconomic variables in the model, we present a novel method for putting momentum strategies into practice. With a well-diversified futures portfolio spanning several asset classes, we evaluate the performance of a managed futures strategy. The study comes to the conclusion that building a portfolio based on academically and economically sound momentum signals and timing its allocation based on broader economic factors significantly enhances managed futures strategies and adds significant benefits to investors’ portfolios in terms of diversification.
Keywords: backwardation; economic regimes; momentum strategy; systematic trading
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
Plagiarism Report: Turnitin Plagiarism Report will be less than 10%
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