COMMODITYINDICES
TABLE 1: COMMODITIES IN THE INDICES & SAMPLE
microstructure effect. We consider the estimated index inflow num-
W
bersasaproxyfortheincreasingpresenceofcommodityindiceson
EIGHTINGS FROM JUNE 2008
exchanges. As index investments are unique in being almost entire-
DJ-AIG GSCI
ly long purchases of commodities, their increased presence intro-
Commodity Symbol Weights Weights
ducesmorelong-biasednoiseintomarkets.
Agriculturals
Live Cattle LC 3.97% 1.69%
... increased transparency about market activity
Lean Hogs LH 2.05% 0.95%
Feeder Cattle FC 0.00% 0.31%
would help markets identify which trades are
Kansas Wheet KW 0.00% 0.75%
fundamentally driven versus which are simply noise
Chicago Wheat W 3.81% 3.12%
Corn C 6.64% 3.69%
Soybeans S 7.86% 2.03%
From a policymaking viewpoint, the discussion emphasises the
Soybean Oil BO 2.95% 0.00% needformeasuredcautionandsensitivitywhenregulatingmarkets.
Base Metals Anoutrightbanoffuturesmarketactivitywoulddefeatthepurpose
Aluminum MAL 6.62% 2.18%
ofpreventingfinancialovershooting,asiteliminatestheverymarket
Copper MCU 6.62% 2.63%
Zinc MZN 1.65% 0.38%
in which physical participants seek to manage risk. However,
Nickel MNI 2.79% 0.54% increased transparency about market activity would help markets
Lead MPB 0.00% 0.25%
identifywhichtradesarefundamentallydrivenversuswhicharesim-
Precious Metals
ply noise, thus improving market efficiency and mitigating behav-
Gold GC 6.04% 1.48%
Silver SI 2.27% 0.21%
iouralovershooting.
Softs
Cotton CT 2.07% 0.72%
HowLargeAreIndexInvestors?
Coffee KC 2.46% 0.49%
Sugar SB 2.27% 0.84%
The CIT reports break down the aggregate futures and options
CN_908_CDMC:Layout 1 22/8/08 16:34 Page 1
Cocoa CC 0.22% 0.22% positions into commercial, non-commercial, and index trader cate-
Energy gories and by long and short positions. The CIT reports begin in
Brebt Crude Oil LCO 0.00% 14.57%
January 2006 and cover only 12 agricultural commodities. Thus, a
Crude Oil CL 16.05% 40.18%
Natural Gas NG 15.88% 7.58%
method is needed to estimate index investment in other commodi-
Unleaded Gasoline RB 4.25% 4.56% tiessuchasenergyandmetals.
Heating Oil HO 4.91% 5.27%
With a statistically estimated market share of commodity indices
Gasoil LGO 0.00% 5.36%
into the two largest representatives (GSCI and DJ-AIG) and their
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