Curve Momentum in China

ABSTRACT Incorporating the distinct characteristics of the Chinese futures market, we implement a momentum strategy within the commodity futures curves. Our diversified curve momentum strategy yields significantly positive average excess returns, achieving a Sharpe ratio comparable to or exceeding those of traditional futures factors. These excess returns are difficult to reconcile with risk‐based explanations. We show that a behavioral mechanism based on investor herding plays a central role in generating the strategy's excess returns. A cross‐market comparison between China and the United States further shows that differences in maturity‐level liquidity structure condition whether herding‐driven trading pressure can propagate into persistent relative return continuation along the futures curve. The profitability of the strategy remains robust when subjected to tests of alternative formation and holding periods, weighting schemes, decision delays, transaction costs and definitions of the commodity cross section, and is not driven by narrow subsets of commodities.