Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/253820 
Year of Publication: 
2021
Citation: 
[Journal:] Journal of Economics, Finance and Administrative Science [ISSN:] 2218-0648 [Volume:] 26 [Issue:] 52 [Publisher:] Emerald Publishing Limited [Place:] Bingley [Year:] 2021 [Pages:] 222-236
Publisher: 
Emerald Publishing Limited, Bingley
Abstract: 
Purpose - This article examines whether deviations from fundamental value or closed-end country fund's discounts or premiums forecast future share price returns or net asset returns. Design/methodology/approach - The main empirical (econometric) tool is a vector autoregressive (VAR) model. The authors model share price returns and net asset returns as a function of their lagged values, the discounts or premiums, and a control variable for local market returns. The authors also conduct Dickey Fuller and Granger causality tests as well as impulse response functions. Findings - It was found that deviations from fundamental value do predict share price returns. This predictability is contrary to weak-form market efficiency. Premiums or discounts predict net asset returns but weakly. Originality/value - The findings point to the idea that the closed-end fund market is somewhat predictable and inefficient (in its weak form) since the market appears to be able to anticipate a fund's future returns using information contained in the premiums (or discounts). In particular, the market has the ability to anticipate future behaviour because growing premiums forecast declining share price returns for one or two periods ahead.
Subjects: 
Closed-end fund
Discount
Premium
Puzzle
Vector autoregressive models
JEL: 
G12
G15
G23
G40
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.