Commodity Investing: From Theory to Practice · Dr MAI Huu MinhChapter 15 of 22 · Module 4: Theory
CHAPTER 15
Commodity Indexes
How the main indexes are built
Opening question
“Two commodity indexes rose 5% and 25% in the same year. How can that happen?”
In this chapter
- Why most commodity funds are really "index rules plus futures"
- What a commodity index holds and how its daily return is calculated
- Production-weighted, liquidity-weighted and fixed-weight designs
- The main index families: S&P GSCI, Bloomberg Commodity Index and others
- Caps, sector limits and rebalancing, with a worked capping example
- Rolling rules: front-month, deferred and optimised rolling
- Spot, excess-return and total-return versions — and which one to compare with a fund
- The 5% versus 25% puzzle solved with numbers
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 15 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Commodity Investing: From Theory to Practice (Volume 2, NXW Investment Library).
Read Chapter 1 freeGet the full book — [email protected]Sections of this chapter
15.1 Why indexes matter
15.2 What a commodity index holds
15.3 Weighting methods
15.4 The main index families
15.5 Caps, sector limits and rebalancing
15.6 Rolling rules
15.7 Spot, excess-return and total-return versions
15.8 The 5% versus 25% puzzle
15.9 Reading an index methodology