The Goldman Roll by Scott Barrie and Kevin Warner
Does it affect the commodities markets?
The Goldman Sachs Commodity Index (GSCI)
is a world production–weighted index that
measures commodity market returns. The
quantity of each commodity in the index is
determined by the average quantity of production
in the last five years. The GSCI is composed of commodities from all sectors. As you can see
from Figure 1, energy, metals, and agriculture are all represented.
The variety of commodities ensures the GSCI is well
diversified, both across subsectors and within each subsector.
The GSCI encompasses a passive portfolio of long positions
in the nearest-to-expiration futures contracts. Unlike a
passive portfolio in equities, a passive one in futures con tracts requires regular transactions because, of course, futures
contracts expire. To avoid any possible deliveries,
futures close to expiration are rolled forward — that is,
exchanged for contracts with the next closest expiration date
— during the month preceding the contract month.