34: Commodities Flashcards
Production value weighted index will have more expsoure to:
more energy,
than livestock or softs
Production value weighted gives largest weight to most valuable commodity, energy is typically has the highest physical trade value
Commodity Indexes can be:
equal weighted
factor weighted
Roll methodology:
Passive strategy is to roll the expiring futures contracts into:
the near month contract each month
Roll methodology:
Active strategy would maximize roll return by selecting:
further out contracts with:
greatest backwardation
&
smallest contango
Rebalancing portfolio weights less frequently will increase returns when prices are:
trending
Rebalancing portfolio weights more frequently will increase returns when prices:
price changes are
choppy
&
mean reverting
Correlations between returns on commodity indexes are:
& correlations between commodity index returns & stocks/bonds are:
high amonst them
low w/ stocks & bonds
Energy sector
Crude oil is impacted by:
- Economic cycles (demand is higher during expansion)
- Politics
- Technology
Energy sector
Refined products (gasoline, heating, jet fuel) is impact by:
- short shelf life
- Seasonal factors (weather)
- natural gas- high costs of transportation
- politics
Industrial metals are impacted by:
- tied to GDP growth
- tied to business cycles
- political factors (union strikes)
Grains are impacted by:
- storage can be risky
Precious metals are impacted by:
- business cycles
- demand is higher in wealthier places
Livestock is impacted by:
- price of grain (food)
- tied to GDP
- Weather
- diseases
Softs (cotton, coffee, sugar, cocoa) are impacted by:
- weather
- demand increases with increased incomes
Of the energy sector, which commodities are impacted by refinery operations:
Impacted:
* Gasoline (refined product)
Not Impacted:
* Crude oil: can be stored
* Natural gas: can be used directly after extraction, but with high transportation costs
