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Contributions of Crude Oil Exchange Traded Funds in Price Discovery Process

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Listed:
  • Shrestha, Keshab

    (Monash University)

  • Philip, Sheena

    (Monash University)

  • Peranginangin, Yessy

    (Monash University)

Abstract

This study empirically investigates the contributions of three crude oil-based exchange-traded funds (ETFs) in the price discovery process. Using daily data on the crude oil spot, near month crude oil futures, and three crude-oil-based ETFs, we analyze the price discovery contributions of the five-price series. We use two information share measures, namely the generalized information share (GIS) measure (Lien and Shrestha, 2014) and the permanent-temporary decomposition (PT/GG) measure (Gonzalo and Granger, 1995). We find that the futures market dominates the price discovery process. However, we also find that the crude-oil-based ETFs significantly contribute to the price discovery process. Thus, we find that additional ETFs play a significant role in price discovery. Therefore, they are not redundant in terms of their price discovery contributions.

Suggested Citation

  • Shrestha, Keshab & Philip, Sheena & Peranginangin, Yessy, 2020. "Contributions of Crude Oil Exchange Traded Funds in Price Discovery Process," American Business Review, Pompea College of Business, University of New Haven, vol. 23(2), pages 393-407, November.
    • Handle: RePEc:ris:ambsrv:0019
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    More about this item

    Keywords

    Price Discovery; Cointegration; Information Share; Crude Oil;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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