By trading, modeling, and hedging commodities, the authors learned that commodities are materially impacted by calendar events and seasonality that may not be fully priced into the commodity futures markets until these events approach the maturity of a commodity’s futures contract. The authors discuss how the seasoned commodity expert in a specific sector or commodity must consider these events as catalysts for short and intermediate commodity price moves, which allow for an increased probability of mean reversion in certain time periods and an increased probability of counter-seasonal price trends in other periods. In addition, based on the authors’ historical research, these observations should be useful in improving upon the design of a systematic futures trading system based on mean reversion.
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