Commodity price index

A commodity price index is a fixed-weight index or (weighted) average of selected commodity prices, which may be based on spot or futures prices. It is designed to be representative of the broad commodity asset class or a specific subset of commodities, such as energy or metals.It is an index that tracks a basket of commodities to measure their performance. These indexes are often traded on exchanges, allowing investors to gain easier access to commodities without having to enter the futures market. The value of these indexes fluctuates based on their underlying commodities, and this value can be traded on an exchange in much the same way as stock index futures.

Investors can choose to obtain a passive exposure to these commodity price indices through a total return swap or a commodity index fund. The advantages of a passive commodity index exposure include negative correlation with other asset classes such as equities and bonds, as well as protection against inflation. The disadvantages include a negative roll yield due to contango in certain commodities, although this can be reduced by active management techniques, such as reducing the weights of certain constituents (e.g. precious and base metals) in the index.

Dow Jones & Company

Dow Jones & Company is an American publishing and financial information firm that has been owned by News Corp. since 2007.

The company was best known for the publication of the Dow Jones Industrial Average and related market statistics, Dow Jones Newswire and a number of financial publications. In 2010 the Dow Jones Indexes subsidiary was sold to the CME Group and the company focused on financial news publications, including its flagship publication The Wall Street Journal and providing financial news and information tools to financial companies.

The company was led by the Bancroft family, which held 64% of voting stock, from the 1920s until 2007 when an extended takeover battle saw News Corp take control of the company.

History

The company was founded in 1882 by three reporters: Charles Dow, Edward Jones, and Charles Bergstresser.

Dow Jones was acquired in 1902 by the leading financial journalist of the day, Clarence Barron after the death of co-founder Charles Dow. Upon Barron's death in 1928, control of the company passed to his stepdaughters Jane and Martha Bancroft. The company was led by the Bancroft family, which effectively controlled 64% of all voting stock, until 2007 when an extended takeover battle saw News Corporation acquire the business.

Index

An index is an indirect shortcut derived from and pointing into a greater volume of values, data, information or knowledge. Index may refer to:

Business

Publishing

Commodity

In economics, a commodity is a substantially fungible marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services.

Etymology

The word commodity came into use in English in the 15th century, from the French commodité, "amenity, convenience". Going further back, the French word derives from the Latin commoditas, meaning "suitability, convenience, advantage". The Latin word commodus (from which English gets other words including commodious and accommodate) meant variously "appropriate", "proper measure, time, or condition", and "advantage, benefit".

Types of commodity

The term commodity is specifically used for an economic good or service when the demand for it has no qualitative differentiation across a market. In other words, a commodity good or service has full or partial but substantial fungibility; that is, the market treats its instances as equivalent or nearly so with no regard to who produced them. As the saying goes, "From the taste of wheat, it is not possible to tell who produced it, a Russian serf, a French peasant or an English capitalist."Petroleum and copper are other examples of such commodities, their supply and demand being a part of one universal market. Items such as stereo systems, on the other hand, have many aspects of product differentiation, such as the brand, the user interface and the perceived quality. The demand for one type of stereo may be much larger than demand for another.

Commodity channel index

The commodity channel index (CCI) is an oscillator originally introduced by Donald Lambert in 1980.

Since its introduction, the indicator has grown in popularity and is now a very common tool for traders in identifying cyclical trends not only in commodities, but also equities and currencies. The CCI can be adjusted to the timeframe of the market traded on by changing the averaging period.

Calculation

CCI measures a security’s variation from the statistical mean.

The CCI is calculated as the difference between the typical price of a commodity and its simple moving average, divided by the mean absolute deviation of the typical price. The index is usually scaled by an inverse factor of 0.015 to provide more readable numbers:

where the p_t is the , SMA is the simple moving average, and σ is the mean absolute deviation.

For scaling purposes, Lambert set the constant at 0.015 to ensure that approximately 70 to 80 percent of CCI values would fall between −100 and +100. The CCI fluctuates above and below zero. The percentage of CCI values that fall between +100 and −100 will depend on the number of periods used. A shorter CCI will be more volatile with a smaller percentage of values between +100 and −100. Conversely, the more periods used to calculate the CCI, the higher the percentage of values between +100 and −100.