Abnormal Returns in Gold and Silver Exchange Traded Funds

Exchange Traded Funds (ETFs) are one of the fastest growing areas of investing and have significantly changed investor behavior, yet there is limited academic research on ETFs, with minimal on commodity based ETFs. This paper is the first to examine whether abnormal returns are available for Gold and Silver ETFS. Gold and silver ETFs have attracted substantial investments, with $40.5 billion USD in gold (GLD) is and $5.22 billion in silver (SLV). Our study shows that while inefficiency is present in the gold and silver ETF markets for the period 2006-2009, when risk is factored the abnormal returns evaporate. However, use of simple filter trading rules does allow abnormal returns. GLD and SLV exhibit similar characteristics to the underlying physical assets and when ignoring risk are able to provide investors with greater profit than if investing in the market