What is the 'Commodity Research Bureau Index - CRB'

The Commodity Research Bureau (CRB) Index acts as a representative indicator of today's global commodity markets. It measures the aggregated price direction of various commodity sectors. The index comprises a basket of 19 commodities, with 39% allocated to energy contracts, 41% to agriculture, 7% to precious metals and 13% to industrial metals.The CRB is designed to isolate and reveal the directional movement of prices in overall commodity trades.

BREAKING DOWN 'Commodity Research Bureau Index - CRB'

History of the CRB

After the Great Depression in the 1930s, trading activity in stocks, bonds, and commodity futures was beginning to show some life. However, traders and those interested in commodities found very few sources of comprehensive information were available to them. With that in mind, a journalist named Milton Jiler founded the Commodity Research Bureau, with the Futures Market Service as its first publication, according to the CRB website. He felt traders needed something that better reflected the overall price activity in the commodity markets. To solve this problem and improve trade transparency, the CRB Index was designed to provide a dynamic representation of broad trends in commodity prices.

In 1986 the New York Futures Exchange (NYFE) introduced the CRB Futures Price Index and quickly became the most watched contract on the exchange. Today several different brokers support commodity indices that track baskets of commodities to reflect price movements. Investors recognize them as a significant barometer of commodity prices and market access. For example, The Thomson Reuters Equal Weight Commodity Index is the CRB Index in its original equal weight from 1957.

Other Commodity Indices

The CBR is one of the original commodity index providers. Since its inception, many other providers have followed. For example, there is the Bloomberg Commodity Index, UBS Bloomberg CMCI, Reuters/Jefferies CRB, Rogers International and the S&P Goldman Sachs Commodity Index. All of these indices are designed to provide liquid and diverse exposure to actual commodities through futures contracts.

Commodities as an Asset Class

The three main asset classes are traditionally equities, or stocks; fixed income, or bonds; and cash equivalents, or money market instruments. More recently investment professionals have added commodities to the asset class mix. Some investment professionals feel they are beneficial to an investor's portfolio because they add diversification, inflation protection, and absolute returns. Others asset managers think commodities are a niche asset class that are subject to high price volatility. Regarding strategies, passive long-only indexes represent the highest exposure, according to a study by the CFA Institute. To this end, commodity indices such as the CRB are an invaluable tool to portfolio managers.

RELATED TERMS
  1. Commodity Index

    A commodity index is an investment vehicle that tracks a basket ...
  2. Commodity

    A commodity is a basic good used in commerce that is interchangeable ...
  3. Commodity Trader

    A commodity trader focuses on investing in physical substances ...
  4. Excluded Commodity

    An excluded commodity is a commodity that is beyond the control ...
  5. Dow Jones AIG Commodity Index - ...

    The Dow AIG Commodity Index - DJ-AIGCI, now called the Bloomberg ...
  6. Long The Basis

    Long the basis is the practice of purchasing a commodity and ...
Related Articles
  1. Trading

    Commodities Continue to Climb

    The chart of the Thomson Reuters/CoreCommodity CRB Index (CRB) suggests upside potential for commodities.
  2. Investing

    Commodity Funds 101

    These funds make investing in gold, oil or grain an easier prospect.
  3. Investing

    Commodities: The Portfolio Hedge

    These diverse asset classes can provide downside protection and upside potential. Find out how to use them.
  4. Investing

    Commodities Without Worries

    ETFs have made commodities investing easier, but look before leaping.
  5. Investing

    3 Reasons to Invest in Discounted Commodities

    Though they're selling at depressed prices, there are several reasons that it could make sense to invest in commodities now.
  6. Investing

    DBC: PowerShares DB Commodity Tracking ETF

    Find out about the PowerShares DB Commodity Tracking ETF, and explore a detailed analysis of the fund that tracks 14 distinct commodities using futures contracts.
  7. Investing

    3 ETFs That Suggest Commodities Are Headed Lower (COMT, DBC)

    Nearby trendlines and resistance from major moving averages suggest that the broad commodities market is headed lower from here.
  8. Investing

    The Role Of Speculators In The Commodity Market

    Contrary to popular belief, speculators are important for the market. Find out exactly what they do.
  9. Investing

    Commodity Investing 101

    From the orange juice we drink to the gas we use to power our vehicles and heat our homes, commodities play important roles in our daily lives.
  10. Investing

    The Biggest Commodity Exchange-traded Funds

    Exchange-traded commodity funds provide interested investors an easy opportunity to participate in this less traditional investment market.
RELATED FAQS
  1. What's the difference between a commodity and a product?

    Understand the difference between commodities and products, and learn how they are connected to each other and to market ... Read Answer >>
  2. Can mutual funds invest in options and futures? (RYMBX, GATEX)

    Learn how mutual funds invest in stock options and futures to benefit from commodities price swings and hedge their portfolio ... Read Answer >>
  3. How do I learn technical skills for trading commodities?

    Learn what resources are available to learn about trading commodities, and understand some of the differences between stocks ... Read Answer >>
  4. What are managed futures?

    Managed futures are futures positions entered into by professional money managers, known as commodity trading advisors, on ... Read Answer >>
Hot Definitions
  1. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  2. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  3. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  4. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  5. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  6. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
Trading Center