Combining Momentum, Term Structure, and Inventory Factors in CTA Portfolios
Summary
This 2017 review compares commodity trading adviser factors and explores ways to combine them. It covers time-series and return-signal momentum, roll yield, basis momentum, and changes in warehouse receipts and inventories. The report says standalone time-series momentum struggled in a wide-ranging market, while the composite momentum signal was positive across tested parameter groups. Term-structure and fundamental factors also posted positive cumulative results for the year.
A target-volatility strategy combined composite momentum, roll yield, basis momentum, and inventory change. The report then describes an improved portfolio using walk-forward analysis and factor weighting to adapt parameters and weights and reduce overfitting. Reported backtest results include annualized return, Sharpe, and Calmar figures for the full sample, plus 2017 performance, though some figures in the supplied summary are missing. These historical results do not establish future performance; the report flags systemic market, model specification, liquidity, and fundamental-change risks.
Key ideas
- Time-series momentum faced challenges during the wide-ranging market conditions of 2017.
- Composite momentum combines time-series momentum with return-signal momentum.
- Roll yield, basis momentum, and inventory-related factors were also evaluated.
- A target-volatility CTA strategy combined several signals into one portfolio.
- Walk-forward analysis and factor weighting were used to adapt the portfolio and limit overfitting.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.