Strategies · Library · Commodities
§9.4Factor
Value
Define value as the price from five years ago over the current price. Buy the cheapest third, sell the dearest third, monthly.
- Asset class
- Commodities
- Held for
- Months
- Data
- ARCANE has the data
- Symphony
- Builds as a long-only proxy
The rule
- Signal
- Past price divided by current price.
- Entry and exit
- Rebalance monthly.
- Sizing
- Long cheap tercile, short rich tercile.
How it fails
- Long-lived trends
- Roll effects in proxies
- Short leg
Data it needs
- commodity spot prices over five years
Futures and commodity ETFs have long close history.
How ARCANE uses it
A long-horizon mean-reversion view could cite this.
Builds as a long-only proxy. Two-asset long-only pair that holds the one lagging over five years; no short leg.
Filed under the factor card
Own companies that are small, cheap, profitable and invest conservatively, against their opposites, and rebalance once a year.
A paper plan from this card holds 63 to 365 days, stops at 2× the expected move and uses at most 75% of your risk budget. The card
Source: Kakushadze and Serur (2018), 151 Trading Strategies, §9.4, p. 91 of the SSRN version. Described in our words. Factor is ARCANE’s filing, not the book’s.