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Factor based commodity investing

Journal of Banking & Finance 2020 115, 105807 open access
A multi-factor commodity portfolio combining the momentum, basis, basis-momentum, hedging pressure and value commodity factor portfolios outperforms significantly, economically and statistically, widely used commodity benchmarks. We find evidence that a variance timing strategy applied to commodity factor portfolios generates timing gains for the commodity momentum factor but not the other commodity factors. Dynamic commodities strategies based on commodity factor return prediction models provide little value added.