PT  - JOURNAL ARTICLE
AU  - Daniel Broby
AU  - Andrew McKenzie
AU  - Olivier Bauthéac
TI  - Practical Applications of Factor Model Index for Commodity Investment
AID  - 10.3905/pa.2022.pa509
DP  - 2022 Aug 17
TA  - Practical Applications
PG  - pa.2022.pa509
4099  - https://pm-research.com/content/early/2022/08/16/pa.2022.pa509.short
4100  - https://pm-research.com/content/early/2022/08/16/pa.2022.pa509.full
AB  - Institutional investors, especially pension funds, often obtain commodity exposures by investing in commodity futures. But while investment in any asset class requires appropriate benchmarks for performance measurement and return attribution, the proper criteria for investment strategies based on commodity futures are just beginning to emerge.In Factor Model Index for Commodity Investment, from the Winter 2021 issue of The Journal of Index Investing, authors Daniel Broby of Ulster University, Andrew McKenzie of the University of Arkansas, and Olivier Bauthéac of Strathclyde Business School propose an approach for constructing a factor model index for commodities that is replicable and investable. They contend that factor model indexes (FMIs) can be substituted for existing production-based indexes that utilize futures contracts. The technique allows commodity investors to construct an optimal portfolio and measure investment performance more accurately.