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A Truly Market-Value Weighted Commodity Index

Title data

Ludwig, Michael ; Mayer, Herbert G. ; Rathgeber, Andreas W. ; Spriegel, Christina ; Vogg, Florian:
A Truly Market-Value Weighted Commodity Index.
In: Journal of Asset Management. Vol. 18 (2017) Issue 3 . - pp. 222-242.
ISSN 1479-179X

Official URL: Volltext

Abstract in another language

Commodity indices play a central role in passive commodity investing. However, a closer look at commodity indices reveals huge differences in construction and weighting. For stock market indices on the other side, weighting is generally based on the market capitalization of an asset, according to the capital market theory. In contrast to this sound theoretical and practicable basis for stocks, there is a serious deficiency in commodity indexation. Therefore, in line with the classical capital market theory we present a novel approach to determine the “total investable amount” of commodities, which is the essential requirement for market capitalization based commodity indexation. In addition, we show a comprehensive model application: according to the proposed index weighting, energy allocation is significantly undervalued in existing index compositions, whereas metals and soft commodities are overvalued. Additionally, our results show that a market capitalization weighted commodity index offers very attractive risk-return-characteristics for investors, compared to existing commodity indices.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: Commodities; CAPM; indexation; portfolio management
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Research Institutions
Research Institutions > Affiliated Institutes
Research Institutions > Affiliated Institutes > Fraunhofer Project Group Business and Information Systems Engineering
Research Institutions > Affiliated Institutes > FIM Research Center Finance & Information Management
Faculties > Faculty of Law, Business and Economics
Result of work at the UBT: No
DDC Subjects: 000 Computer Science, information, general works > 004 Computer science
300 Social sciences > 330 Economics
Date Deposited: 09 Jan 2018 10:53
Last Modified: 01 Oct 2018 10:57