Abstract This paper examines whether the volatility management suggested by Moreira and Muir to improve profitability in the equity market can generate significant benefits both in-sample and out-of-sample in commodity futures markets as well. The in-sample results show the significant success of volatility management from the 12-month momentum and market portfolio, but the out-of-sample results show that volatility management fails to improve real-time performance, which indicates that in-sample results are not obtainable for real-time investors in the commodity futures markets. To understand the failure of volatility management, we perform the simulation analysis and find that a negative risk-return relation seems to play a pivotal role in addition to strong volatility persistency to make volatility management successful.
Description
Volatility‐managed commodity futures portfolios - Kang - 2021 - Journal of Futures Markets - Wiley Online Library
%0 Journal Article
%1 https://doi.org/10.1002/fut.22175
%A Kang, Jangkoo
%A Kwon, Kyung Yoon
%D 2021
%J Journal of Futures Markets
%K ba vol_timing
%N 2
%P 159-178
%R https://doi.org/10.1002/fut.22175
%T Volatility-managed commodity futures portfolios
%U https://onlinelibrary.wiley.com/doi/abs/10.1002/fut.22175
%V 41
%X Abstract This paper examines whether the volatility management suggested by Moreira and Muir to improve profitability in the equity market can generate significant benefits both in-sample and out-of-sample in commodity futures markets as well. The in-sample results show the significant success of volatility management from the 12-month momentum and market portfolio, but the out-of-sample results show that volatility management fails to improve real-time performance, which indicates that in-sample results are not obtainable for real-time investors in the commodity futures markets. To understand the failure of volatility management, we perform the simulation analysis and find that a negative risk-return relation seems to play a pivotal role in addition to strong volatility persistency to make volatility management successful.
@article{https://doi.org/10.1002/fut.22175,
abstract = {Abstract This paper examines whether the volatility management suggested by Moreira and Muir to improve profitability in the equity market can generate significant benefits both in-sample and out-of-sample in commodity futures markets as well. The in-sample results show the significant success of volatility management from the 12-month momentum and market portfolio, but the out-of-sample results show that volatility management fails to improve real-time performance, which indicates that in-sample results are not obtainable for real-time investors in the commodity futures markets. To understand the failure of volatility management, we perform the simulation analysis and find that a negative risk-return relation seems to play a pivotal role in addition to strong volatility persistency to make volatility management successful.},
added-at = {2021-12-18T14:57:53.000+0100},
author = {Kang, Jangkoo and Kwon, Kyung Yoon},
biburl = {https://puma.ub.uni-stuttgart.de/bibtex/2d3faf8f3675d35be211c79218ae9cfcf/georglender},
description = {Volatility‐managed commodity futures portfolios - Kang - 2021 - Journal of Futures Markets - Wiley Online Library},
doi = {https://doi.org/10.1002/fut.22175},
eprint = {https://onlinelibrary.wiley.com/doi/pdf/10.1002/fut.22175},
interhash = {a6f300a1f51af0a9c8fd64d357e04707},
intrahash = {d3faf8f3675d35be211c79218ae9cfcf},
journal = {Journal of Futures Markets},
keywords = {ba vol_timing},
number = 2,
pages = {159-178},
timestamp = {2021-12-18T13:57:53.000+0100},
title = {Volatility-managed commodity futures portfolios},
url = {https://onlinelibrary.wiley.com/doi/abs/10.1002/fut.22175},
volume = 41,
year = 2021
}