commodity index

long-run geometric return of the average commodity ≈ 0
long-run geometric return of the commodity index > 0

-->Rebalancing of the index due to commodity price changes.

Because prices of individual commodities change, the index must be rebalanced, with:

• decreased allocation to commodities whose prices increased, and 
• increased allocation to commodities whose prices decreased.

Booth and Fama (1992) showed that the geometric return of a rebalanced portfolio is higher than the average return of its constituents.