Definition of commodity indices

indices that measure either the price or performance of physical commodities, or the price of commodities as represented by the price of futures contracts that are listed on commodity exchanges. Due to the complexities of holding physical commodities, investors tend to focus on futures indices that are liquid baskets of commodities. Institutional investors prohibited from investing directly in the futures market can include commodities in their portfolios through these indices. The leading indices include
Continuous Commodity Index (CCI): The commodities index algorithm that, until June 17, 2005, had been known as the Reuters CRB Index. On June 20, 2005, the Reuters CRB Index was renamed the Reuters Jefferies CRB Index, and given a new algorithm. The old algorithm is now published as the CCI. The CCI is made up of 17 commodities whose futures trade on U.S. exchanges. The index is a broad measure of overall commodity price trends. There are five component groups: Energy (17.6%)-crude oil, heating oil, natural gas; Grains (17.6%)-corn, wheat, soybeans; Industrials (11.8%)-copper, cotton; Precious Metals (17.6%)-gold, silver, platinum; Livestock (11.8%)-live cattle, lean hogs; Softs (23.5%)-coffee, cocoa, sugar, orange juice. Equal weighting is used for both arithmetic averaging of individual commodity months and for geometric averaging of the 17 commodity averages. As a result, no single month or commodity has undue impact on the index. Futures and options on the CCI trade on the New York Board of Trade (NYBOT). Futures are settled at contract maturity by cash payment. www.nybot.com.
Dow Jones-AIG Commodity Index (DJ-AIGCI): This is a rolling index composed of futures contracts on 19 physical commodities traded on U.S. exchanges, with the exception of aluminum, nickel, and zinc, which are traded on the London Metal Exchange (LME). Weighting is based on liquidity, or the relative amount of trading activity of a particular commodity; dollar-adjusted production data are secondary. All data used are averaged over a five-year period. The DJ-AIGCI is calculated on an excess return basis, reflecting only the return of its underlying commodity price movements. A total return index reflects the return on a fully collateralized investment of the index. The DJ-AIGCI is also available in the euro and yen denominated versions, as well as a spot price version. There are nine subindexes representing the index's major sectors: Precious Metals, Industrial Metals, Energy, Grains, Livestock, Petroleum, Softs, Agriculture, and ExEnergy. To assure that commodity exposure is diversified, no related group of commodities may constitute more than 15% or less than 2% of the index. Annual rebalancing and reweighting ensure that diversity is maintained over time. Futures contracts are traded on the CBOT and the TRAKR is traded on CME. djindexes.com.
Goldman Sachs Commodity Index (GSCI): a composite index of commodity sector returns, representing an unleveraged, long-only investment in commodity futures that is broadly diversified. Inclusion is based on liquidity and world production weight. Each component is weighted by its respective world production quantities in the last five years, enabling the GSCI to respond to world economic growth. The total number of constituent commodities, as well as the number in each sector, is adjusted for liquidity in the underlying futures markets, just as the dollar weights and index values are adjusted daily, based on real-time prices. As of June 30, 2005, the index consisted of 24 commodities from all commodity sectors: Energy; Industrial Metals; Precious Metals; Agriculture; and Livestock. Following are the weightings for these groups and their components: Energy (75.79%)-crude oil (29.50%), Brent crude oil (14.70%), unleaded gasoline (8.39%), heating oil (8.88%), gas oil (5.10%), natural gas (9.22%); Industrial Metals (6.31%)-aluminum (2.49%), copper (2.32%), lead (0.74%), nickel (0.26%), zinc (0.49%); Precious Metals (1.86%)-gold (1.67%), silver (0.19%); Agriculture (11.00%)-wheat (2.49%), red wheat (0.90%), corn (2.46%), soybeans (1.83%), sugar (1.26%), coffee (0.75%), cocoa (0.21%); Livestock (5.03%)-live cattle (2.56%), feeder cattle (0.73%), lean hogs (1.74%). The index has a rolling yield, reflecting expiration and rolling forward of underlying futures contracts. Three GSCI indices are published. The GSCI Excess Return Index measures the returns accrued from investing in uncollateralized nearby commodity futures. The GSCI Total Return Index measures the return from investing in fully collateralized nearby commodity futures. The GSCI Spot Index measures the level of nearby commodity prices. Futures and options on the GSCI are traded on the chicago mercantile exchange. www.gs.com/gsci.