Closed-End Fund Discounts in a Rational Agent Economy
Closed-End Fund Discounts in a Rational Agent Economy

Author: Matthew I. Spiegel

Publisher:

Published: 2000

Total Pages: 41

ISBN-13:

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Nearly any standard financial model concludes that two assets with identical cash flows must sell for the same price. Alas, closed-end mutual fund company share prices seem to violate thisfundamental tenant. Even when one considers several standard frictions, such as taxes and agency costs, classical financial models cannot explain the large persistent discounts foundwithin the data. While the standard financial markets model may not explain the existence of large closed-end fund discounts, this paper shows that a rather close version of it does. In anotherwise frictionless market, if asset supplies vary randomly over time and agents posses finite lives a closed-end mutual fund's stock price may not track its net asset value. Furthermore, the analysis provides a number of conditions under which these discrepancies will lead to the existence of systematic discounts for the mutual fund's shares. In addition, the model provides predictions regarding the correlation between current closed-end fund discounts and current changes in stock prices and future changes in corporate productivity. As the analysis shows the same parameter values that lead to systematic discounts also lead to other fund price characteristics that resemble many of the results found within empirical studies.

Closed-End Fund Pricing
Closed-End Fund Pricing

Author: Seth Anderson

Publisher: Springer Science & Business Media

Published: 2013-04-17

Total Pages: 106

ISBN-13: 1475736339

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Closed-End Investment Companies (CEICs) have experienced a significant revival of interest, both as investment vehicles and as the subject of academic research, over the past decade. This academic research has focused on the nature of closed-end funds' discounts and premiums and on the share price behavior of these firms. The first book by the authors, "Closed-End Investment Companies: Issues and Answers," addresses closed-end fund academic articles published prior to 1991. This second book addresses those articles that have appeared since that time. Closed-End Fund Pricing: Theories and Evidence is designed for the academic researcher interested in CEICs and the practitioner interested in using CEICs as an investment vehicle. The authors summarize the evolution of CEICs, present the factors thought to cause CEIC shares to trade at different levels from their net asset values, provide a complete survey of the recent academic literature on this topic, and summarize the current state of research on CEICs.

Asset Pricing
Asset Pricing

Author: B.Philipp Kellerhals

Publisher: Springer Science & Business Media

Published: 2012-11-02

Total Pages: 247

ISBN-13: 3540246975

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Covers applications to risky assets traded on the markets for funds, fixed-income products and electricity derivatives. Integrates the latest research and includes a new chapter on financial modeling.

A Rational Model of the Closed-end Fund Discount
A Rational Model of the Closed-end Fund Discount

Author: Jonathan B. Berk

Publisher:

Published: 2004

Total Pages: 28

ISBN-13:

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The discount on closed-end funds is widely accepted as proof of investor irrationality. We show,however, that a parsimonious rational model can generate a discount that exhibits many of the characteristics observed in practice. The only required features of the model are that managers have (imperfectly observable) ability to generate excess returns; they sign long-term contracts guaranteeing them a fee each year equal to a fixed fraction of assets under management; and they can leave to earn more money elsewhere if they turn out to be good. With these assumptions, time-varying discounts are not an anomaly in a rational world with competitive investors -- they are required.

Quasi Rational Economics
Quasi Rational Economics

Author: Richard H. Thaler

Publisher: Russell Sage Foundation

Published: 1994-01-04

Total Pages: 396

ISBN-13: 9780871548474

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Standard economics theory is built on the assumption that human beings act rationally in their own self interest. But if rationality is such a reliable factor, why do economic models so often fail to predict market behavior accurately? According to Richard Thaler, the shortcomings of the standard approach arise from its failure to take into account systematic mental biases that color all human judgments and decisions.

Closed-End Fund Pricing
Closed-End Fund Pricing

Author: Seth Anderson

Publisher: Springer

Published: 2013-02-16

Total Pages: 102

ISBN-13: 9781475736342

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Closed-End Investment Companies (CEICs) have experienced a significant revival of interest, both as investment vehicles and as the subject of academic research, over the past decade. This academic research has focused on the nature of closed-end funds' discounts and premiums and on the share price behavior of these firms. The first book by the authors, "Closed-End Investment Companies: Issues and Answers," addresses closed-end fund academic articles published prior to 1991. This second book addresses those articles that have appeared since that time. Closed-End Fund Pricing: Theories and Evidence is designed for the academic researcher interested in CEICs and the practitioner interested in using CEICs as an investment vehicle. The authors summarize the evolution of CEICs, present the factors thought to cause CEIC shares to trade at different levels from their net asset values, provide a complete survey of the recent academic literature on this topic, and summarize the current state of research on CEICs.

Contemporary Issues in Financial Institutions and Markets
Contemporary Issues in Financial Institutions and Markets

Author: Claudia Girardone

Publisher: Routledge

Published: 2016-04-14

Total Pages: 143

ISBN-13: 1317610040

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This book showcases recent academic work on contemporary issues in financial institutions and markets. It covers a broad range of topics, highlighting the diverse nature of academic research in banking and finance. As a consequence the contributions cover a wide range of issues across a broad spectrum, including: capital structure arbitrage, credit rating agencies, credit default swap spreads, market power in the banking industry and stock returns. This timely collection offers fresh insights and understandings into the ongoing debates within and between the academic and professional finance communities. This book was originally published as a special issue of the European Journal of Finance.

Investor Sentiment and the Closed-end Fund Puzzle
Investor Sentiment and the Closed-end Fund Puzzle

Author: Charles Lee

Publisher:

Published: 1990

Total Pages: 72

ISBN-13:

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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.