Consider the four major commodities traded on a commodity futures exchange today (year 10). The following table

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Consider the four major commodities traded on a commodity futures exchange today (year 10). The following table lists the average annualized price movements from year 1 to year 10, as well as the production volumes, expressed in the local currency unit, today (year 10) and ten years ago (year 1).
Consider the four major commodities traded on a commodity futures

The futures exchange has now decided to create a commodity index based on the four commodities, with weights equal to their current relative importance in economic production. These indexes are back-calculated till year 1 using today's weights.
a. Would such an index give unbiased indications over the past 10 years?
b. What suggestions do you have regarding weights that can be used to back-calculate the indexes?

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Global Investments

ISBN: 978-0321527707

6th edition

Authors: Bruno Solnik, Dennis McLeavey

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