Timing strategy performance in the crude oil futures market

- Trading performance in the crude oil futures market is assessed.
- A novel trading strategy based on moment timing is introduced.
- Risk preferences, trading session length, and transaction costs are considered.
- Volatility timing strategies are the most successful.

The rewards to speculative trading in the crude oil futures market are assessed. For investors who adopt timing strategies that maximise their (iso-elastic) utility during each trading session, the rewards can be economically significant providing that transaction costs are small. Moreover, we are able to show via a decomposition of performance that the bulk of this benefit is due to their ability to predict realised volatility (that is, the second realised moment). The benefits derived from predicting other realised moments either require unrealistic levels of skill (all odd moments) or an infeasible degree of risk aversion (the fourth moment and higher even moments).