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S&P Dow Jones launches roll-weighted commodity index
11 July 2013
S&P GSCI Roll Weight Select designed to reduce negative contango impact
S&P Dow Jones
S&P Dow Jones Indices has launched a roll-weighted commodity index, the S&P GSCI Roll Weight Select, designed to minimise the negative impacts of contango.
The index is designed to maintain a high level of liquidity by including only liquid front month contracts and the 14 most liquid commodities representing each sector, based on the existing S&P GSCI Equal Weight Select index.
Jodie Gunzberg, vice president, S&P Dow Jones Indices, said: “The S&P GSCI Roll Weight Select is designed to preserve beta while maintaining liquidity. The Index uses an innovative technique to measure the gradient of a single commodity index in order to weight the commodities to reflect the shape of a curve.”
S&P added the index rebalances the weighting of the underlying commodities based on relative changes in the realised roll yield for each commodity in the index, which it said was a new index weighting measure.
For each commodity, the measure itself is the difference of monthly returns (between the excess return and price return) of the current month single commodity index subtracted from the difference of monthly returns (between the excess return and price return) of the one month forward for each single commodity index.