Dow Jones adds contango-reducing strategy to its index suite
Dow Jones Indexes has launched a commodity index series that seeks to minimise the contango effect on index performance using a strategy that selects futures contracts exhibiting the least amount of contango
The Dow Jones-UBS Roll Select Commodity Index aims to mitigate the effects of contango on index performance by rolling into the futures contracts showing the least amount of contango, or the most backwardation, selecting them from contracts with nine months or fewer until expiration.
"Contango has a negative impact on the roll yield," says Jamie Farmer, executive director at Dow Jones Indexes in New York. "When something is in contango as you're rolling, you are selling a cheaper contract and
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