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The influence of ETFs on the price discovery of gold, silver and oil

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  • Stoyu Ivanov

Abstract

In this study we examine gold, silver and oil exchange traded funds (ETFs) and their relation to their respective futures instruments and underlying commodities by using intradaily data. We find that the gold, silver and oil ETFs closely track the performance of their underlying assets by using tracking error and pricing deviation metrics. It has been documented in the finance literature that price discovery occurs in the futures market. We test whether in recent times the existence of ETFs has changed the dominating role of the futures market in price discovery. We find that the availability of ETFs has shifted price discovery for gold and silver to the ETF market, while the oil market has price discovery occurring still predominantly in the futures market. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Stoyu Ivanov, 2013. "The influence of ETFs on the price discovery of gold, silver and oil," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 37(3), pages 453-462, July.
    • Handle: RePEc:spr:jecfin:v:37:y:2013:i:3:p:453-462
    DOI: 10.1007/s12197-011-9205-8
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    4. 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.
    5. Syed Jawad Hussain Shahzad & Naveed Raza & David Roubaud & Jose Arreola Hernandez & Stelios Bekiros, 2019. "Gold as Safe Haven for G-7 Stocks and Bonds: A Revisit," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(4), pages 885-912, December.
    6. Junior, Peterson Owusu & Tiwari, Aviral Kumar & Padhan, Hemachandra & Alagidede, Imhotep, 2020. "Analysis of EEMD-based quantile-in-quantile approach on spot- futures prices of energy and precious metals in India," Resources Policy, Elsevier, vol. 68(C).
    7. O'Connor, Fergal A. & Lucey, Brian M. & Batten, Jonathan A. & Baur, Dirk G., 2015. "The financial economics of gold — A survey," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 186-205.
    8. Bosch, David & Pradkhan, Elina, 2015. "The impact of speculation on precious metals futures markets," Resources Policy, Elsevier, vol. 44(C), pages 118-134.
    9. Vigne, Samuel A. & Lucey, Brian M. & O’Connor, Fergal A. & Yarovaya, Larisa, 2017. "The financial economics of white precious metals — A survey," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 292-308.
    10. Owusu Junior, Peterson & Tweneboah, George, 2020. "Are there asymmetric linkages between African stocks and exchange rates?," Research in International Business and Finance, Elsevier, vol. 54(C).
    11. Yu-Min Lian & Jian-Chi Yang & Ko-Liang Kuo, 2022. "The Impact of Market Factors and News Sentiments on Silver Futures ETFs," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 12(2), pages 1-2.
    12. S. Narend & M. Thenmozhi, 2016. "What drives fund flows to index ETFs and mutual funds? A panel analysis of funds in India," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 43(1), pages 17-30, March.
    13. Yaya, OlaOluwa S. & Vo, Xuan Vinh & Olayinka, Hammed A., 2021. "Gold and silver prices, their stocks and market fear gauges: Testing fractional cointegration using a robust approach," Resources Policy, Elsevier, vol. 72(C).
    14. Cheng, Wan-Hsiu & Chen, Chun-Da & Lai, Hsiao-Pin, 2020. "Revisiting the roles of gold: Does gold ETF matter?," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    15. Otero, Luis A. & Reboredo, Juan C., 2018. "The performance of precious-metal mutual funds: Does uncertainty matter?," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 13-22.
    16. Sanjay Sehgal & Neharika Sobti & Florent Diesting, 2021. "Who leads in intraday gold price discovery and volatility connectedness: Spot, futures, or exchange‐traded fund?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(7), pages 1092-1123, July.
    17. Narinder Pal Singh & Navneet Joshi, 2019. "Investigating Gold Investment as an Inflationary Hedge," Business Perspectives and Research, , vol. 7(1), pages 30-41, January.
    18. Abid, Fathi & Kaffel, Bilel, 2018. "Time–frequency wavelet analysis of the interrelationship between the global macro assets and the fear indexes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 1028-1045.
    19. Lau, Marco Chi Keung & Vigne, Samuel A. & Wang, Shixuan & Yarovaya, Larisa, 2017. "Return spillovers between white precious metal ETFs: The role of oil, gold, and global equity," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 316-332.
    20. Bossman, Ahmed & Umar, Zaghum & Agyei, Samuel Kwaku & Junior, Peterson Owusu, 2022. "A new ICEEMDAN-based transfer entropy quantifying information flow between real estate and policy uncertainty," Research in Economics, Elsevier, vol. 76(3), pages 189-205.
    21. Jin, Jiayu & Han, Liyan & Wu, Lei & Zeng, Hongchao, 2020. "The hedging effectiveness of global sectors in emerging and developed stock markets," International Review of Economics & Finance, Elsevier, vol. 66(C), pages 92-117.
    22. Buckle, Mike & Chen, Jing & Guo, Qian & Tong, Chen, 2018. "Do ETFs lead the price moves? Evidence from the major US markets," International Review of Financial Analysis, Elsevier, vol. 58(C), pages 91-103.
    23. Sobti, Neharika & Sehgal, Sanjay & Ilango, Balakrishnan, 2021. "How do macroeconomic news surprises affect round-the-clock price discovery of gold?," International Review of Financial Analysis, Elsevier, vol. 78(C).

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    More about this item

    Keywords

    Gold; Silver; Oil; ETF; Futures; Spot; Price Discovery; G13; G14;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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