Are ETNs Realizing Their Potential? An Empirical Investigation of ETNs vs. Other Exchange-Traded Products in the Precious Metals’ Space

Journal of Index Investing, 2012, Forthcoming

Posted: 26 Jul 2012  

Hélyette Geman

University of London - Economics, Mathematics and Statistics

Lovjit Thukral

Long Rock Capital

Colbrin Wright

Brigham Young University

Date Written: 2012

Abstract

Within the precious metals space, we outline and empirically investigate three potential advantages that ETNs may have relative to other exchange traded products such as ETFs. First, ETNs may be able to offer investors access to a wider array of assets, commodities, currencies and indices with a greater variety of leverage ratios. We find that ETNs do, in fact, offer investors a much greater variety of leverage ratios in the precious metals space compared to other exchange traded products. Second, ETNs may be able to offer investors lower annual expenses than comparable ETFs or other similar exchange traded products. We are unable to statistically corroborate this notion. We do, however, note that some exchange traded products charge non-trivial fees (upwards of 3.74%) to investors that are not included in the annual expense fee, whereas ETNs assess no such implicit fees. Third, ETNs may enjoy greater price efficiency owing to the absence of tracking error. We find no empirical evidence supporting this possibility.

Keywords: Exchange-Traded Notes, Exchange-Traded Funds, Precious Metals

JEL Classification: G10, G11, G12, G14

Suggested Citation

Geman, Hélyette and Thukral, Lovjit and Wright, Colbrin, Are ETNs Realizing Their Potential? An Empirical Investigation of ETNs vs. Other Exchange-Traded Products in the Precious Metals’ Space (2012). Journal of Index Investing, 2012, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2117299

Helyette Geman

University of London - Economics, Mathematics and Statistics ( email )

Malet Street
London, WC1E 7HX
United Kingdom

Lovjit Thukral

Long Rock Capital ( email )

1 Cornhill
London, EC3V 3ND
United Kingdom

Colbrin Wright (Contact Author)

Brigham Young University ( email )

United States
(801) 422 1224 (Phone)

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