Generally, investment in commodity ETFs cannot produce similar performance as well as spot goods. Evidence shows that ¡§rolling¡¨ futures positions experience ¡§contango and the effects on contango will harm ETFs¡¨ value. This study shows that two ETFs, USO and UNG, underperform the spot substantially because of rolling in the crude oil and natural gas market, respectively. In this study we employ four energy sector futures market data from the Thomson Reuters to investigate the impact of rolling positions on the relation between commodity index funds and in contango/backwardation. This paper finds that increasing trading in commodity index fund made futures market more contango in the WTI crude oil, natural gas and heating oil markets. This study termed the strategy as the Backwardation Sensitive Trading (BST) . Moreover, this research designs an investment strategy based on variation of backwardation. That is to examine whether BST can make a successful arbitrage: increase holding when the market is more contango and decrease holding when the market is more backwardation. Our strategy performs better than USO and UNG, and those performances perform lower tracking error on oil and natural gas over 2006 to 2010.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0325111-181330 |
| Date | 25 March 2011 |
| Creators | Tsai, Shang-en |
| Contributors | Yih Jeng, Der-ming Lieu, So-De Shyu |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0325111-181330 |
| Rights | not_available, Copyright information available at source archive |
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