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Major Currency ETFs and Their Associated Spot and Futures Rates

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  • Chaiyuth Padungsaksawasdi

    (Department of Finance, Thammasat Business School, Thammasat University, Bangkok, Thailand)

  • Ali Parhizgari

    (Department of Finance, College of Business Administration, Florida International University, USA)

Abstract

To find a substitute vehicle for a direct investment in currencies, we study the behaviors of six major currency exchange-traded funds (ETFs) and their respective spot and futures markets prior to and during the financial crisis of 2008. Our findings indicate that currency ETFs are near-perfect substitutes for a direct investment in currencies. We observe statistically significant differences in market behavior from the non-crisis subperiod to the crisis subperiod. Notwithstanding these differences, the price discovery of both the spot and the futures currency markets relative to their associated ETFs is overwhelming, consistent, and, to a large extent, similar. Under more stable conditions, the spot and the futures currency markets possess more dominant informational positions relative to their corresponding ETF markets.

Suggested Citation

  • Chaiyuth Padungsaksawasdi & Ali Parhizgari, 2017. "Major Currency ETFs and Their Associated Spot and Futures Rates," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(04), pages 1-32, December.
    • Handle: RePEc:wsi:rpbfmp:v:20:y:2017:i:04:n:s0219091517500266
    DOI: 10.1142/S0219091517500266
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    Cited by:

    1. Parhizgari, A.M. & Padungsaksawasdi, Chaiyuth, 2021. "Global equity market leadership positions through implied volatility measures," Journal of Empirical Finance, Elsevier, vol. 61(C), pages 180-205.

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