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1、1 Commodity Quant Strategy 06 March 2018 The trend is your friend introducing BNP Paribas commodity momentum strategy We introduce our BNP Paribas trend model for base metals, gold and energy commodity futures. We have named the new model BNPP-TIF.The approach will complement the two already in pla
2、ce: MarFATMTM and our multi-factor model.BNPP-TIF comprises seven different commodity futures: gold, WTI crude oil, Brent crude oil, copper, nickel, zinc and aluminium.In line with several academic articles, the back-test results show that the proposed approach has historically been profitable and o
3、utperformed different benchmarks.Since 2007, the back-test results showed a 20.5% return per annum (average of the seven commodities that comprise the model) with a hit ratio of 55%.Introduction The growth in commodity futures investments has been significant in recent years the net notional value o
4、f trading more than doubled from roughly USD 170bn in 2007 to USD 420bn in 2015 (Bessler Vrugt et al., 2004; Wang and Yu, 2004; Erb and Harvey, 2006). They can also be used as portfolio diversifiers and an effective hedge against inflation (Bodie and Rosansky, 1980; Bodie, 1983). They provide levera
5、ge and are not subject to short-selling restrictions. In addition, the front end of the curve is usually liquid and cheap to trade. The momentum strategy buys the commodity futures that have outperformed in the recent past, sells the commodity futures that have under-performed and holds the relative
6、-strength portfolios. The contrarian strategies (BNP Paribas MarFATM and multifactor models) do the opposite: they buy (sell) the commodity futures that are abnormally below (above) the models central fitted value and sell (buy) them when they move to this central value. Several articles show that p
7、ositive returns can be generated using momentum strategies, which is a significant feature of the ongoing market efficiency debate. Chevallier et al. (2013) showed that commodities in general (and energy commodities in particular) present stronger trends than other asset classes such as equities and
8、 currencies (Figure 1). This should make a strong case for using commodities in particular in momentum strategies. However, such articles also point out that there are differences across commodities in how persistent trends tend to be. Moskowitz et al. (2012) argue that time series momentum meets th
9、e expectations of many prominent behavioural pricing theories. Their findings of positive time series momentum that partially reverses over time may be consistent with initial under-reaction and delayed over- reaction. They argue that their findings of consistent time series momentum across nearly f
10、ive dozen futures contracts and several major asset classes over the last 25 years challenge the random walk hypothesis which states that past price history is not useful when forecasting the direction the price will take in the future. COMMODITY QUANT STRATEGY Please refer to important information
11、at the end of the report This document has been produced by: Banco BNP Paribas Brasil S.A. Gabriel Gersztein Commodity Quant Strategy Head of GM Latam Strategy +55 11 3841 3421 Gustavo Mendonca Commodity Quant Strategy FX HML is a zero-investment portfolio that is long on high book-to-market (B/M) s
12、tocks and short on low B/M stocks, and UMD is a zero-cost portfolio that is long previous 12- month return winners and short previous 12-month loser stocks. Activity Rebounds (GDP, IP) Growth peaking Growth moderatingFalling Activity Inflation Credit begins to grow Credit growth gains pace Credit ti
13、ghtensCredit dries upProfits grow rapidly Profit growth peaks Earnings under pressureProfits declinePolicy still stimulative Policy neutral Policy contractionaryPolicy easesInventories low Inventories, sales grow Inventories grow; Inventories fall; Sales improve Inflation and commodities Sales growt
14、h fallsSales fallNOWPos GrowthNeg GrowthYield CurveBull SteepeningBear Flattening Bear SteepeningEARLYMIDLATERECESSIONRECOVERYEXPANSIONCONTRACTIONStage IStage II3 Commodity Quant Strategy 06 March 2018 BNP Paribas Commodity Quant Strategy Offering With the launch of new model, we have three approac
15、hes in place: MarFATM and multifactor model, which focus on contrarian strategies, and BNPP-TIF, which aims at getting the most out of periods of strong serial correlation in commodity price returns. BNP Paribas approach We have applied logistic regressions and use returns, and macroeconomic and fin
16、ancial indicators as explanatory variables. The first step was to empirically map the upward and downward trend periods for each commodity using a time window of 572 weekly observations. The selected period (2007-2018) includes a robust sample of market phases: upward and downward cycles, different monetary policies, the crisis of 2008, t
