The securitization of gold and its potential impact on gold stocks

摘要: Abstract We study the market impact of a very successful financial innovation – SPDR Gold Trust exchange-traded fund (GLD). GLD holds physical gold, and provides traders with convenient cost-effective way to gain exposure gold. find that after introduction GLD, liquidity gold company stocks declined, their adverse-selection risk increased. Over two-month period GLD’s introduction, stocks’ relative effective bid-ask spreads increased by over 15%, while cost, as measured price trades, went up more than 30%. also experienced significant negative abnormal returns (−12% on average) in month started trading. Our findings suggest attracted traders, especially uninformed away from stocks, resulting demand shocks decrease caused prices decline. results show existing securities can be seriously adversely affected when new security enters market.