Download or read book Investor Sentiment and the Closed end Fund Puzzle written by Charles Lee and published by . This book was released on 1990 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the proposition that fluctuations in discounts on closed end funds are driven by changes in individual investor sentiment toward closed end funds and other securities. The theory implies that discounts on various funds must move together, that new funds get started when seasoned funds sell at a premium or a small discount, and that discounts on the funds fluctuate together with prices of securities affected by the same investor sentiment. The evidence supports these predictions. In particular, we find that discounts on closed end funds narrow when small stocks do well, as would be expected if closed end funds were subject to the same sentiment as small stocks, whim tern. also to be held by individual investors. The evidence thus suggests that investor sentiment affects security returns.
Download or read book Investor Sentiment and the Closed End Fund Puzzle written by Charles Lee and published by . This book was released on 2011 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the proposition that fluctuations in discounts on closed end funds are driven by changes in individual investor sentiment toward closed end funds and other securities. The theory implies that discounts on various funds must move together, that new funds get started when seasoned funds sell at a premium or a small discount, and that discounts on the funds fluctuate together with prices of securities affected by the same investor sentiment. The evidence supports these predictions. In particular, we find that discounts on closed end funds narrow when small stocks do well, as would be expected if closed end funds were subject to the same sentiment as small stocks, whim tern. also to be held by individual investors. The evidence thus suggests that investor sentiment affects security returns.
Download or read book The Closed End Fund Discount Puzzle written by Urbi Garay and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Academic research has focused specifically on the enigmatic behavior of closed-end fund discounts, known in the literature as the closed-end fund discount puzzle. The extant evidence suggests that closed-end funds are issued at a premia with respect to their net asset values but typically trade at discounts thereafter, that the average closed-end fund trades at a significant discount relative to its net asset value, that discounts fluctuate widely over time and also across funds, and that closed-end fund prices converge to their net asset values when they are either liquidated or open-ended. Some of the theories that have been advanced attempting to explain the puzzle are efficient market based explanations and the Investor Sentiment Hypothesis. None of the theories, either individually or collectively, provide a sufficient explanation for the pricing of closed-end funds and, therefore, the enigma continues.
Download or read book The Closed end Fund Discount written by Elroy Dimson and published by . This book was released on 2002 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Investor s Guide to Closed end Funds written by Thomas J. Herzfeld and published by McGraw-Hill Companies. This book was released on 1980 with total page 232 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Closed end Fund Puzzle written by Weiyi (Eric) Zhang and published by . This book was released on 2014 with total page 200 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates the closed-end fund puzzle in China. This thesis finds rational theories of the closed-end fund discount puzzle, such as fund shares and holding asset liquidity, fund past performance and fees, are important determinants of the fund premiums. Several of these attributes are measured by innovative proxies. For instance, fund past performance is measured by the information ratio or t-alpha, which is often used in hedge fund performance evaluation studies, and the Amihud illiquidity measure is employed to test the association between fund liquidity and premiums. In addition, we also find supporting evidence for irrational theories or sentiment theories. First, fund premiums reflect fund future performance, implying premiums may contain expectation component or, alternatively, sentiment component. Second, the association between changes in value weighted discount and small-cap stock returns is significant across all size-sorted portfolios, when the market is booming and the number of retail investors participating in the market is increasing.
Download or read book Inefficient Markets written by Andrei Shleifer and published by OUP Oxford. This book was released on 2000-03-09 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.
Download or read book The Closed end Fund Puzzle written by Yunpeng Zhang and published by . This book was released on 2009 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: The closed-end fund (CEF) puzzle, which focuses on the difference between the net asset value (NAV) and the CEF price, has been the focus of academic research for decades. This dissertation includes both theoretical and empirical work studying the existence and fluctuations of equity CEF discounts. Chapter Two sets up an equilibrium asset pricing model for the global CEF. Assuming no communication between the NAV country and the CEF country, the equilibrium NAV and CEF prices are characterized separately in closed forms. In equilibrium, the NAV only depends on the current dividend value and the subjective discount rate. However, the equilibrium CEF price also depends on future dividend dynamics until the open-end date. Furthermore, comparative sensitivity analyses and simulations show how the CEF discount fluctuates with different parameter configurations. In conclusion, this chapter finds three factors important to understand the CEF puzzle: (1) The equilibrium interest rate is partially exogenous with respect to the CEF; (2) The NAV portfolio cannot perfectly be hedged by the market assets space; (3) The total number of outstanding CEF shares is fixed in the financial market. Chapter Three investigates the correlation between the NAV return and the CEF discount in global CEFs by estimating the convenience yield using a two-factor dynamic state space model and constructing liquidity risk measures combining the work of Datar, Naik, and Radcliffe (1998) and Amihud (2002). The empirical results show that the CEF discount is negatively correlated with the NAV return but positively correlated with the liquidity risk measure, which is consistent with Chan, Jain and Xia (2008). Chapter Four proposes a theoretical model for the CEF discount change on the open-end announcement using a representative agent portfolio optimization model. Before the announcement, the CEF discount dynamic follows a mean-reverting process. After the announcement, the discount dynamic is modified to converge to zero on the open-end date, which changes the budget constraint of the portfolio optimization. Assuming that the portfolio holding of CEF shares is unaffected by the announcement, the discount change on that date can be solved numerically. Empirical applications also present positive supports for the proposed explanation.
Download or read book Investor Sentiment and the Closed end Fund Puzzle written by Charles M. C. Lee and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Investor Sentiment and the Closed End Fund Puzzle written by John A. Doukas and published by . This book was released on 2003 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we examine the proposition that small investor sentiment, measured by the change in the discount/premium on closed-end funds, is an important factor in stock returns. We conduct an out-of-sample test of the investor sentiment hypothesis in a market environment that is more likely to be prone to investor sentiment than the U.S. We fail to provide supporting evidence of the claim of Lee, Shleifer, and Thaler (1991) that investor sentiment affects the risk of common stocks. Consistent with Elton, Gruber, and Busse (1998), who show that investor sentiment does not enter the return generating process, our tests do not detect investor sentiment in a capital market that is more susceptible to small investor sentiment. Our results provide additional support against the claim that investor sentiment represents an independent and systematic asset pricing risk.
Download or read book Investments and Portfolio Performance written by Edwin J. Elton and published by World Scientific. This book was released on 2011 with total page 417 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book contains the recent contributions of Edwin J. Elton and Martin J. Gruber to the field of investments. All of the articles in this book have been published in the leading finance and economic journals. Sixteen of the twenty articles have been published in the last ten years. This book supplements the earlier contributions of the editors published by MIT Press in 1999.
Download or read book The Closed End Funds written by Martin Cherkes and published by . This book was released on 2011 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper offers a new explanation to the closed-end funds' puzzles. It is driven by two observations: the fact the closed-end fund is a public company with a guaranteed, long-term annual compensation for Fund's entrenched management; and the assumption (acceptable within classical rational-and-efficient-markets paradigm) that management adds value to assets-under-their-management. As a result, the value of the closed end fund's shares is an algebraic sum of assets-under-management plus the [capitalized] value-added by the management minus the [capitalized] value of the costs-of-management. This approach is rich enough to explain several of perceived quot;puzzlesquot;, such as the persistence of discounts, relationship between a Fund's discount and its dividend policy, the zero correlation between discounts and interest rates, and the excess volatility of Fund's share price. It suggests a positive theory of the closed-end fund as an efficiency-driven organizational form of fund management.The paper's arguments are supported by our preliminary empirical study. The approach provides a number of empirically testable hypotheses.
Download or read book The Closed End Fund Puzzle Between Classical Finance and Behavioral Finance written by Feker Bayoudh and published by . This book was released on 2008 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a thorough review, including the authors' latest thinking, of one of the most persistent and troubling puzzles to the efficient market hypothesis: the closed-end fund puzzle.Financial economists have intensely scrutinised the economic explanations of the discount within the context of the efficient market hypothesis. Unfortunately, empirical evidence show that none of the traditional explanations individually accounts for all aspects of the closed-end fund discount.The failure of economic hypotheses to explain the closed-end fund discount leads many authors to explore behavioral explanations.We outline then the psychological evidence for this phenomenon and give a taxonomy for an array of factors that come under the common label of sentimental hypothesis.
Download or read book The Closed end Fund Puzzle written by David Lefty and published by . This book was released on 2007 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Unraveling the Closed End Funds Pricing Puzzle written by Philip Russel and published by . This book was released on 2008 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: We review the empirical results and some of the important explanations that have been advanced for the anomalous pricing of closed-end funds and conclude that none of the theories, either individually or collectively provide a sufficient explanation for the pricing of closed-end funds and thus the puzzle remains unsolved. We investigate additional evidence on the pricing of closed-end funds using data from 1994:2002 by exploring the relationship between closed-end fund discount and five explanatory variables. The results suggest that there is significant relationship between fund discount and fund family.
Download or read book Some Puzzling Results from Examining the Closed End Fund Puzzle written by Christopher J. Contino and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Closed End Fund Premium Puzzle and Portfolio Fund Risk Differences written by David Lee Manzler and published by . This book was released on 2008 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seemingly at odds with market efficiency, it is well-known that closed-end funds (CEF) trade at a discount (negative premium) to the net asset values (NAVs) of the portfolios these CEFs hold. Yet, since the CEF shares and the underlying securities held by the CEF trade in completely different markets (with limited means of cross-market arbitrage), the returns on the CEF and the returns on the underlying portfolio may not move in lock-step. In this paper, we investigate whether the returns of closed-end funds (CEFs) behave differently than the returns of the underlying portfolio of securities held by the CEF. We show that, on average, the returns on CEFs have significantly (both economically and statistically) higher risk (i.e., factor loadings) and volatility than the returns on their underlying portfolios (i.e., NAV returns), but have roughly the same mean returns. We also show that the difference in risk and performance between the CEF and its NAV explain cross-sectional variation in the size of difference between the NAV and the price of the CEF (i.e., the CEF premium). Possibly adding to the puzzle though, we find that idiosyncratic risk is positively related to CEF premiums (higher relative idiosyncratic risk for the CEF results in higher relative CEF price to NAV). Our conclusion is that CEFs have a life of their own and that the difference in the return behavior rationally accounts for (at least a portion) of the CEF premium puzzle.
