Feedback Trading in Saffron Exchange Traded Funds

Commodity Exchange Traded Funds (ETF) are one type of ETF that underlying assets are agricultural products, energy or metals instead of stocks. These ETFs expose their investors to the market of various commodities in different ways, such as physical commodity, futures of single commodity, futures of baskets commodities, equities with exposures to commodities in various forms. In recent years, this financial instrument has become one of the important investment options among several people by creating many advantages. Despite these developments, scarce evidence exists in the current literature on the feedback trading of ETF investors. The objective of this paper is examination of feedback trading in behavior investors of Saffron ETF in Iran. For this purpose, daily data of two Saffron ETF for January 3, 2021 - Novenber 11, 2022 and Sentana and Wadhwani (1992) model was used. Empirical analysis suggests that volatility of fund return is symmetrical against the news. Despite a formal market with full overlapping for the underlying assets, Saffron ETFs investors do not notice about the difference between ETFs' market prices and their Net Asset Value (NAV). The results of the feedback trading model show that there is no evidence of feedback trading in Saffron ETF. It seems that the market of Saffron ETF is efficient, which can be related to the specificity of the underlying assets and the investors of these ETFs.