RT Journal Article
SR Electronic
T1 Practical Applications of Factor Model Index for Commodity Investment
JF Practical Applications
FD Institutional Investor Journals
SP pa.2022.pa509
DO 10.3905/pa.2022.pa509
A1 Daniel Broby
A1 Andrew McKenzie
A1 Olivier Bauthéac
YR 2022
UL https://pm-research.com/content/early/2022/08/16/pa.2022.pa509.abstract
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.