Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/231665 
Year of Publication: 
2018
Citation: 
[Journal:] Financial Studies [ISSN:] 2066-6071 [Volume:] 22 [Issue:] 3 (81) [Publisher:] Romanian Academy, National Institute of Economic Research (INCE), "Victor Slăvescu" Centre for Financial and Monetary Research [Place:] Bucharest [Year:] 2018 [Pages:] 27-40
Publisher: 
Romanian Academy, National Institute of Economic Research (INCE), "Victor Slăvescu" Centre for Financial and Monetary Research, Bucharest
Abstract: 
Given the size of the commodity index market, rollovers require large numbers of contracts to be purchased and sold on rollover dates. Index providers are careful in choosing their roll methods in order to minimize volatility and maximize the market efficiency of their indexes. This study investigates the efficiency of various roll methodologies compared to their respective continuous futures series. We compare roll methodologies to see whether they have similar volatility and efficiency characteristics as näive rolling. Daily settlement prices for 15 commodities (precious metals, metals, agriculture, and energy) from each of five index providers (Credit Suisse (CS), Merrill Lynch (ML), Dow Jones - UBS (DJUBS), Diapson (DCI) and Standard and Poor's - Goldman Sachs (GS)) were collected and analyzed. Daily prices for a continuous series of futures contracts (Continuous Futures Series) representing each of the aforementioned commodities is used as a benchmark. Results show that any differences that indexes have with their continuous futures series are dependent on the type of commodity and not on a particular roll methodology. Thus, an investor/ETP investing in commodities should not worry about the roll methodology used by an index provider.
Subjects: 
futures
contracts
rollover
diversification
JEL: 
G11
G13
G19
Creative Commons License: 
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Document Type: 
Article

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