Unlike equities, which entitle the holder to a continuing stake in a corporation, commodity futures contracts specify a delivery date for the underlying physical commodity. In order to avoid delivery and maintain a long futures position, nearby contracts must be sold and contracts that have not yet reached the delivery period must be purchased. While the former reflects the return of its underlying commodity price movements only, the latter reflects the return on a fully collateralized investment in the index. Liquidity is an important indicator of the value placed on a commodity by financial and physical market participants. The index also relies to a lesser extent on dollar-adjusted production data.
All data used in both the liquidity and production calculations is averaged over a five-year period.
The component weightings are also determined by several rules designed to insure diversified commodity exposure. Committee members are drawn from the academic, financial and legal communities. The most recent Oversight Committee meeting took place in June 1999, with changes in index composition effective January 2000. Inc. All Rights Reserved.