Can Storage Momentum and Its Difference of a Nonferrous Metal Predict Price Return?

ABSTRACT This study contributes to nonferrous metal market predictability by introducing dynamic measures, namely storage momentum and momentum difference, as innovative predictors for future contract returns. Our exploration reveals distinct predictability patterns, with compelling evidence in copper, zinc, and nickel, while aluminum displays comparatively lower predictability. Our proposed tailored predictability test accommodates correlated, heteroscedastic, and heavy‐tailed residuals, addressing the limitations of conventional tests. Out‐of‐sample forecasts affirm the sustained predictive performance of storage momentum and momentum difference for copper and nickel, establishing our work as a pioneering contribution to the nuanced landscape of nonferrous metal market predictability.