TY - JOUR T1 - Indexing Covariation in Base-Metals Prices JF - The Journal of Index Investing SP - 87 LP - 93 DO - 10.3905/jii.2014.5.3.087 VL - 5 IS - 3 AU - Nilanjan Ghosh AU - Neha Sinha AU - Siddhant Jhunjhunwala Y1 - 2014/11/30 UR - https://pm-research.com/content/5/3/87.abstract N2 - A nonferrous base-metals index representative of the physical and futures market of the constituent metals (aluminium, copper, zinc, lead, tin, and nickel) is constructed using principal component analysis. The unique mathematical core to construction aims to capture maximum covariation in the metals basket and avoid subjectivity in weight assignment. The constructed index is evaluated to gauge usefulness to stakeholders. The index fares well on investment parameters, allows near-perfect hedge-to-price risk, and works as an information variable by acting as a lead indicator to industrial production. Notably, the period of analysis follows the economic turmoil of 2008–2009, enhancing the relevance of this study.TOPICS: Mutual funds/passive investing/indexing, commodities, statistical methods ER -