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Gold Exchange Traded Fund - Price Discovery and Performance Analysis

Author

Listed:
  • Mallika Mathew

    (Jagannath International Management School, Kalkaji, New Delhi, India)

  • Sulphey M. M.

    (College of Business Administration, Prince Sattam Bin Abdulaziz Unviersity, Saudi Arabia)

Abstract

The paper aims to examine the price discovery process and the performance of Gold Exchange Traded Funds especially with respect to two Gold ETFs, namely, Goldman Sachs Gold Exchange Traded Scheme (GoldBeEs) and SBI Gold Exchange Traded Scheme (SBIGETS), for the period 2009 – 2016. The study has employed Johansen cointegration and Johansen’s Vector Error Correction Model (VECM) for the price discovery analysis. The results of VECM reveal that the spot prices lead the Gold ETFs price during the study period. Tracking Error analysis shows that Gold ETFs have neither outperformed nor underperformed the spot price. Price Deviation analysis indicates that Gold ETFs are trading on an average lower than the spot price of gold. The entire analysis reveals that although the price discovery takes place in the spot market, Gold ETFs have performed as well as physical gold and the slight difference in price with that of Gold is only because of certain fees, which are applicable in the management of Gold ETFs.

Suggested Citation

  • Mallika Mathew & Sulphey M. M., 2018. "Gold Exchange Traded Fund - Price Discovery and Performance Analysis," Scientific Annals of Economics and Business, Sciendo, vol. 65(4), pages 477-495, December.
    • Handle: RePEc:vrs:aicuec:v:65:y:2018:i:4:p:477-495:n:2
    DOI: 10.2478/saeb-2018-0024
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    Keywords

    Gold Exchange Traded Funds; price discovery; price deviation;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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