Journal of Asset Management

, Volume 18, Issue 3, pp 222–242 | Cite as

A truly market-value weighted commodity index

  • Michael Ludwig
  • Herbert G. Mayer
  • Andreas W. Rathgeber
  • Christina Spriegel
  • Florian Vogg
Original Article


Commodity indices play a central role in passive commodity investing. However, a closer look at commodity indices reveals huge differences in construction and weighting. For stock market indices on the other side, weighting is generally based on the market capitalization of an asset, according to the capital market theory. In contrast to this sound theoretical and practicable basis for stocks, there is a serious deficiency in commodity indexation. Therefore, in line with the classical capital market theory we present a novel approach to determine the “total investable amount” of commodities, which is the essential requirement for market capitalization based commodity indexation. In addition, we show a comprehensive model application: according to the proposed index weighting, energy allocation is significantly undervalued in existing index compositions, whereas metals and soft commodities are overvalued. Additionally, our results show that a market capitalization weighted commodity index offers very attractive risk-return characteristics for investors, compared to existing commodity indices.


commodities CAPM indexation portfolio management commodity index 

JEL Classification

G10 G11 G15 



This paper has already been presented—among others—at the following conferences: The 21 Annual Conference Multinational Finance Society (MFS), 2014, Prague, Czech Republic, the Annual Conference of the British Accounting & Finance Association (BAFA), 2016, Bath, England 2015. Furthermore, the authors would like to thank Martin Wallmeier, Stefan Stöckl, Sheraz Ahmed, as well as our anonymous referees for their valuable comments and suggestions.


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Copyright information

© Macmillan Publishers Ltd 2017

Authors and Affiliations

  • Michael Ludwig
    • 2
  • Herbert G. Mayer
    • 1
  • Andreas W. Rathgeber
    • 1
  • Christina Spriegel
    • 2
  • Florian Vogg
    • 2
  1. 1.Institute of Materials Resource ManagementUniversity of AugsburgAugsburgGermany
  2. 2.Research Center Finance & Information ManagementUniversity of AugsburgAugsburgGermany

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