Strategies · Library · Commodities
§9.5Factor
Skewness premium
Compute the skew of past returns per commodity, buy the lowest-skew group, sell the highest.
- Asset class
- Commodities
- Held for
- Months
- Data
- ARCANE has the data
- Symphony
- Cannot be built as a symphony
The rule
- Signal
- Third moment of historical returns.
- Entry and exit
- Rebalance on schedule.
- Sizing
- Long bottom quintile, short top.
How it fails
- Noisy estimates
- Short leg
- Few markets
Data it needs
- commodity futures returns
Daily closes allow skew, but the builder has no skew indicator.
How ARCANE uses it
Skew figures could be cited in a Call.
No skew indicator and shorts needed.
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, §9.5, p. 92 of the SSRN version. Described in our words. Factor is ARCANE’s filing, not the book’s.