Quiz - Commodity Benchmarks

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skillionaire

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Why can commodity benchmarks not use a market-cap method of weighting?
A) They can, and it’s the most frequently used
B) Because the industries are not considered investable
C) Because commodity futures are a zero-sum game
D) The dynamic nature of contracts makes computation prohibitively difficult
 
Good question. Thanks man.
I think I will go with D, but C is also attractive.
EDIT: Can I change? Now I choose C, because Schweser says that.
Book 4 page 17.
 
Sry man for answering your question for you. :D
So can I say, since all derivatives are zero sum, market-cap method is off for all of them? Hedge funds with market neutral strategy is off as well?
skillionaire Wrote:
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> Boris gave it to you above.
 
yeah market cap method cant work for any derivative because they are a zero sum game. The market capitalization would always be zero.
Not sure about hedge funds, because they are not a zero-sum game.
 
i understand that derivatives are zero sum game.
But the text also said “Most of them assume a futures-based strategy, Fox example, DJ-UBSCI and S&PCI represent returns associated with passive long positions in futures”
So could there be a market-cap index, that include market cap of long contracts only?
 
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