Noise trader risk, management expenses, takeovers and liquidations, and the closed-end fund discount puzzle: New evidence from the United Kingdom.

摘要

Closed end funds have been a more important financial institution in Britain than in any other country. Yet empirical research on the closed end fund discount puzzle has focused exclusively on U.S. data. One of the goals of this work is to fill this gap in the literature and provide new evidence from the largest panel of closed end fund discount data ever analyzed. This is also the first attempt to deal explicitly with discount measurement problems caused by multiple security capital structures. The basic stylized facts about discounts on British funds are similar to those that have been reported for their American counterpart, although discounts are generally larger in the UK.; Several potential explanations of the discount are explored empirically. In the third chapter, I devise a new method of estimating the Arbitrage Pricing Theory model, to test a recently proposed conjecture that unexpected changes in the discount represent a "noise trader" risk factor that might be positively priced in equilibrium, thus explaining the average level of the discount. The fourth chapter considers the relation between management expenses and discount phenomena, uncovering simple but profitable trading strategies for fund shares as a byproduct. The final chapter investigates the determinants of liquidations and takeovers of the funds.