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Short sale restrictions, differences of opinion, and single-country, closed-end fund discount

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  • Sanning, Lee W.
  • Skiba, Alexandre
  • Skiba, Hilla

Abstract

The purpose of this paper is to study the closed-end fund discount in Miller's (1977) framework. Miller's theory states that in the simultaneous presence of (1) short sale restrictions and (2) dispersion of investors' opinions, securities become overvalued. We show that discounts of single-country, closed-end funds are related to Miller's two conditions. Consistent with theoretical predictions, we find that neither dispersion of investor opinion nor short sale restrictions alone are positively related to the discount. However, when both conditions exist simultaneously, fund discounts increase.

Suggested Citation

  • Sanning, Lee W. & Skiba, Alexandre & Skiba, Hilla, 2013. "Short sale restrictions, differences of opinion, and single-country, closed-end fund discount," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 44-50.
    • Handle: RePEc:eee:finana:v:29:y:2013:i:c:p:44-50
    DOI: 10.1016/j.irfa.2013.03.013
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    More about this item

    Keywords

    Short sale restrictions; Closed-end fund discount; Investor disagreement;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other

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