IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v16y2006i5p395-404.html
   My bibliography  Save this article

Behavioural and fundamental explanations of discounts on closed end funds: an empirical analysis

Author

Listed:
  • George Emm Halkos
  • Theodore Krintas

Abstract

This study extracts two factors related to the variability of Premium/Discount: a behavioural and a fundamental. Evidence is provided to show that by using both factors one can achieve a better understanding of discounts as theories and the Closed End Funds Puzzle support it.

Suggested Citation

  • George Emm Halkos & Theodore Krintas, 2006. "Behavioural and fundamental explanations of discounts on closed end funds: an empirical analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 16(5), pages 395-404.
  • Handle: RePEc:taf:apfiec:v:16:y:2006:i:5:p:395-404
    DOI: 10.1080/09603100500400312
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100500400312
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/09603100500400312?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Abdur Chowdhury, 1994. "The behaviour of closed-end country fund prices in the Asian NIEs," Applied Economics Letters, Taylor & Francis Journals, vol. 1(12), pages 219-222.
    2. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    3. Gordon Gemmill & Dylan C. Thomas, 2002. "Noise Trading, Costly Arbitrage, and Asset Prices: Evidence from Closed‐end Funds," Journal of Finance, American Finance Association, vol. 57(6), pages 2571-2594, December.
    4. Engle, Robert F & Ng, Victor K, 1993. "Measuring and Testing the Impact of News on Volatility," Journal of Finance, American Finance Association, vol. 48(5), pages 1749-1778, December.
    5. Zweig, Martin E, 1973. "An Investor Expectations Stock Price Predictive Model Using Closed-End Fund Premiums," Journal of Finance, American Finance Association, vol. 28(1), pages 67-78, March.
    6. De Long, J Bradford, et al, 1990. "Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-395, June.
    7. Harrison Hong & Jeremy C. Stein, 1999. "A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets," Journal of Finance, American Finance Association, vol. 54(6), pages 2143-2184, December.
    8. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    9. Swaminathan, Bhaskaran, 1996. "Time-Varying Expected Small Firm Returns and Closed-End Fund Discounts," The Review of Financial Studies, Society for Financial Studies, vol. 9(3), pages 845-887.
    10. Lee, Charles M C & Shleifer, Andrei & Thaler, Richard H, 1991. "Investor Sentiment and the Closed-End Fund Puzzle," Journal of Finance, American Finance Association, vol. 46(1), pages 75-109, March.
    11. Tauchen, George, 1985. "An Investigation of Transactions Data for NYSE Stocks: Discussion," Journal of Finance, American Finance Association, vol. 40(3), pages 739-741, July.
    12. Marc Simpson & Sanjay Ramchander, 2002. "Is differential sentiment a cause of closed-end country fund premia? An empirical examination of the Australian case," Applied Economics Letters, Taylor & Francis Journals, vol. 9(9), pages 615-619.
    13. repec:bla:jfinan:v:43:y:1988:i:1:p:113-127 is not listed on IDEAS
    14. Malkiel, Burton G, 1977. "The Valuation of Closed-End Investment-Company Shares," Journal of Finance, American Finance Association, vol. 32(3), pages 847-859, June.
    15. Leonardo Becchetti & Fabrizio Adriani, 2004. "Do high-tech stock prices revert to their 'fundamental' value?," Applied Financial Economics, Taylor & Francis Journals, vol. 14(7), pages 461-476.
    16. Thompson, Rex, 1978. "The information content of discounts and premiums on closed-end fund shares," Journal of Financial Economics, Elsevier, vol. 6(2-3), pages 151-186.
    17. Engle, Robert F & Lilien, David M & Robins, Russell P, 1987. "Estimating Time Varying Risk Premia in the Term Structure: The Arch-M Model," Econometrica, Econometric Society, vol. 55(2), pages 391-407, March.
    18. De Bondt, Werner F M & Thaler, Richard H, 1987. "Further Evidence on Investor Overreaction and Stock Market Seasonalit y," Journal of Finance, American Finance Association, vol. 42(3), pages 557-581, July.
    19. Brickley, James A & Manaster, Steven & Schallheim, James, 1991. "The Tax-Timing Option and the Discounts on Closed-End Investment Companies," The Journal of Business, University of Chicago Press, vol. 64(3), pages 287-312, July.
    20. Uri Benzion & Yochanan Shachmurove & Joseph Yagil, 2004. "Subjective discount functions - an experimental approach," Applied Financial Economics, Taylor & Francis Journals, vol. 14(5), pages 299-311.
    21. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272.
    22. Harrison Hong, 2000. "A Model of Returns and Trading in Futures Markets," Journal of Finance, American Finance Association, vol. 55(2), pages 959-988, April.
    23. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. George Halkos & Stephanos Papadamou, 2007. "Significance of risk modelling in the term structure of interest rates," Applied Financial Economics, Taylor & Francis Journals, vol. 17(3), pages 237-247.
    2. Stylianos X. Koufadakis, 2016. "Mispricing Explanations of Closed-End Funds: A Survey Review," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 66(1-2), pages 108-135, January-J.
    3. Stylianos X. Koufadakis, 2015. "Asymmetries on Closed End Country Funds Premium and Monetary Policy Announcements: An Approach Trough the Perspective of Foreign Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 65(3-4), pages 29-65, july-Dece.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Halkos, George, 2005. "Determining empirically behavioral and fundamental factors of discounts on closed end funds," MPRA Paper 49280, University Library of Munich, Germany.
    2. Committee, Nobel Prize, 2013. "Understanding Asset Prices," Nobel Prize in Economics documents 2013-1, Nobel Prize Committee.
    3. Kim, Youngsoo & Lee, Bong Soo, 2007. "Limited participation and the closed-end fund discount," Journal of Banking & Finance, Elsevier, vol. 31(2), pages 381-399, February.
    4. Dilip Patro & Louis R. Piccotti & Yangru Wu, 2017. "Exploiting Closed-End Fund Discounts: A Systematic Examination Of Alphas," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 40(2), pages 223-248, June.
    5. David Hirshleife, 2015. "Behavioral Finance," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 133-159, December.
    6. Tarun Ramadorai, 2012. "The Secondary Market for Hedge Funds and the Closed Hedge Fund Premium," Journal of Finance, American Finance Association, vol. 67(2), pages 479-512, April.
    7. Lahr, Henry & Kaserer, Christoph, 2009. "Net asset value discounts in listed private equity funds," CEFS Working Paper Series 2009-12, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    8. Kumari, Jyoti, 2019. "Investor sentiment and stock market liquidity: Evidence from an emerging economy," Journal of Behavioral and Experimental Finance, Elsevier, vol. 23(C), pages 166-180.
    9. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, December.
    10. Stylianos X. Koufadakis, 2015. "Asymmetries on Closed End Country Funds Premium and Monetary Policy Announcements: An Approach Trough the Perspective of Foreign Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 65(3-4), pages 29-65, july-Dece.
    11. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
    12. Jonathan Berk & Richard Stanton, 2004. "A Rational Model of the Closed-End Fund Discount," NBER Working Papers 10412, National Bureau of Economic Research, Inc.
    13. Keunbae Ahn, 2021. "Predictable Fluctuations in the Cross-Section and Time-Series of Asset Prices," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 1-2021, January-A.
    14. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    15. Verma, Rahul & Soydemir, Gökçe, 2009. "The impact of individual and institutional investor sentiment on the market price of risk," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(3), pages 1129-1145, August.
    16. Grullon, Gustavo & Albert Wang, F., 2001. "Closed-End Fund Discounts with Informed Ownership Differential," Journal of Financial Intermediation, Elsevier, vol. 10(2), pages 171-205, April.
    17. Muhammad Zia Ur Rehman & Zain ul Abidin & Faisal Rizwan & Zaheer Abbas & Sajjad Ahmad Baig, 2017. "How investor sentiments spillover from developed countries to developing countries?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1309096-130, January.
    18. Jay Wang, Z. & Nanda, Vikram, 2011. "Payout policies and closed-end fund discounts: Signaling, agency costs, and the role of institutional investors," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 589-619, October.
    19. Mohamed Ayadi & Hatem Ben-Ameur & Skander Lazrak & Yue Wang, 2013. "Canadian Investors and the Discount on Closed-End Funds," Journal of Financial Services Research, Springer;Western Finance Association, vol. 43(1), pages 69-98, February.
    20. Pontiff, Jeffrey, 1995. "Closed-end fund premia and returns Implications for financial market equilibrium," Journal of Financial Economics, Elsevier, vol. 37(3), pages 341-370, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:16:y:2006:i:5:p:395-404. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.