The CRB Index: Components And Calculations
The Commodity Research Bureau Index (CRB) is a widely recognized benchmark for measuring the performance of global commodity markets. It is composed of a basket of 19 different commodities, including energy, precious metals, industrial metals, and agricultural products. In this article, we will take a closer look at the components and calculations of the CRB Index, so that investors and traders can gain a better understanding of how it works and its significance in the commodity markets.
What Are The Components Of The CRB Index?
The CRB Index is made up of 19 different commodity futures contracts, which are carefully selected to represent the broadest possible range of commodity markets. The index is designed to reflect the performance of the commodity markets as a whole, rather than the performance of any single commodity.
The following is a list of the 19 commodities included in the CRB Index:
- Crude oil
- Heating oil
- Lean hogs
- Live cattle
- Natural gas
- Orange juice
- Unleaded gas
- Weightings of the CRB Index
The weightings of the CRB Index are determined by the relative importance of each commodity in the global economy and are based on the production, consumption, and trade of each commodity. The weightings are adjusted periodically to reflect changes in the global commodity markets. As of 2021, the weightings of the CRB Index are as follows:
- Energy commodities (crude oil, heating oil, natural gas, and unleaded gas) account for 45.5% of the index
- Industrial metals (aluminum and copper) account for 21.5% of the index
- Precious metals (gold and silver) account for 12% of the index
- Agricultural products (cocoa, coffee, corn, cotton, lean hogs, live cattle, orange juice, soybeans, sugar, and wheat) account for 21% of the index
How Is The CRB Index Calculated?
The CRB Index is calculated by taking the geometric average of the price changes of the 19 commodity futures contracts included in the index. The geometric average is used because it gives equal weight to each commodity, regardless of its price level. The index is calculated on a continuous basis, with the value of the index being updated every 15 seconds during market hours.
The base value of the CRB Index is set at 200 as of January 4, 1957. The current value of the index is determined by comparing the current prices of the commodity futures contracts to their prices at the base date. The index is expressed as a percentage, with a base value of 200 being equal to 100%.
The CRB Index is a widely recognized benchmark for measuring the performance of global commodity markets. It is composed of a basket of 19 different commodities, including energy, precious metals, industrial metals, and agricultural products. The weightings of the index are determined by the relative importance of each commodity in the global economy, and the index is calculated by taking the geometric average of the price changes of the commodity futures contracts. By understanding the components and calculations of the CRB Index, investors and traders can gain a better understanding of how it works and its significance in the commodity markets.
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