A Study on Silver Exchange-Traded Funds (ETFs) in India: Performance Evaluation

Exchange Traded Funds (ETFs) are hybrid investment vehicles that possess the features of stock shares and index mutual funds, created and redeemed by Authorized Participants (APs). This paper analyzes the short-run performance of the recently launched Silver ETFs in India for a one-year period from 2022 to 2023. The empirical assessment of the study used various performance metrics such as tracking error, appraisal ratio, Ulcer Index, Amihud’s Illiquidity, and Yang-Zhang range-based Volatility to understand the Silver ETFs. The sample data proves to be efficient with the robustness tests such as the Augmented Dickey-Fuller (ADF) Stationarity Test, Durbin Watson Autocorrelation (DWA) test, and Breusch-Pagan Heteroscedasticity (BPH) test. The tracking errors of the selected five silver ETFs traded on the National Stock Exchange (NSE) show prudent deviations from the benchmark indices yet can be considered low. The level of tracking errors obtained by the well–run silver ETFs suggests that it is possible to attain low levels of tracking error under Indian market conditions. Notably, the Silver ETFs have adjusted efficiently to the risk dynamics and outperformed their benchmark indices. The regression results reveal that the tracking errors are highly impacted by liquidity and volatility. In addition, the silver ETFs' returns and downside risks are affected by the underlying benchmark indices significantly.