A few weeks ago, I shared a post about a surprisingly consistent edge found in the weekly spread between nearby futures contracts. The idea was simple, when spreads stretch, they tend to snap back. This anomaly, documented in the Short-Term Basis Reversal paper, gave us the foundation for a market-neutral strategy that went long the…

At QuantReturns, we spend a lot of time digging into niche edges: timing institutional flows, capturing futures reversals or exploiting behavioural biases. These strategies often aim to extract alpha, that elusive outperformance beyond market risk. But there’s another category of strategies that’s equally important to understand, even if it’s less flashy: risk premium harvesting. This post…

The Premise Commodity exposure is accessed via futures contracts, which form a term structure across maturities. In the recent academic paper Short-Term Basis Reversal by Rossi, Zhang, and Zhu (2025), the authors hypothesize that futures along the curve incorporate news information at different speeds, where typically the front-month future reacts more rapidly to news than…

The Premise While much of the research in modern markets has focused on persistent forces like momentum, value, or macro news, relatively little attention has been given to mechanical rebalancing. Every month, asset managers across the globe realign portfolios to target weights: 60/40, risk parity, vol targeting, and everything in between. These flows are large,…

Portfolio Overview Keller’s Lethargic Asset Allocation (LAA) framework is a rules-based approach that aims to reduce portfolio volatility while maintaining long-term exposure to growth assets. It allocates across multiple asset classes to balance risk under varying market conditions, with minimal need for adjustment. The strategy uses a mechanism called the Growth-Trend Indicator, which monitors economic…

Portfolio Overview The 60/40 portfolio is a classic investment strategy designed for steady, long-term growth with moderate risk. With a balanced allocation of 60% in stocks and 40% in bonds, this portfolio is a popular choice among investors looking for growth potential without extreme volatility. The 60/40 portfolio split between equities and bonds has historically…