The influence of ETFs on the price discovery of go

Authors: Stoyu I Ivanov

Publish Date: 2011/08/26

Volume: 37, Issue: 3, Pages: 453-462

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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 marketThis paper was previously circulated under the title “Price Discovery in Commodity Markets” I would like to thank the journal editor James Payne two anonymous referees and San Jose State University AF department seminar participants for their insightful comments and suggestions on this project Any errors are my own

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