We investigate the investability of commodity risk premia in China. Previously documented standard momentum, carry and basis-momentum factors are not investable due to the unique liquidity patterns along the futures curves in China. However, dynamic rolling and strategic portfolio weights significantly boost the investment capacity of such premia without compromising its statistical and economic significance. Meanwhile, style integration delivers enhanced performance and improved opportunity sets. Furthermore, the observed investable premia are robust to execution lags, stop-loss, illiquidity, sub-period specifications, seasonality and transaction costs. They also offer portfolio diversification for investors. Finally, investable commodity premia in China reveal strong predictive ability with global real economic growth.

The Nelson-Siegel framework is employed to model the term structure of commodity futures prices. Exploiting the information embedded in the level, slope and curvature parameters, we develop novel investment strategies that assume short-term continuation of recent parallel, slope or butterfly movements of futures curves. Systematic strategies based on the change in the slope generate significant profits that are unrelated to previously documented risk factors and can survive reasonable transaction costs. Further analysis demonstrates that the profitability of the slope strategy increases with investor sentiment and is in part a compensation for the drawdowns incurred during economic slowdowns. The profitability can also be magnified through timing and persists under alternative specifications of the Nelson-Siegel model.