What Can "Nine-Eleven" Tell Us about Closed-end Fund Discounts and Investor Sentiment?

We use the horrific events of September 11, 2001 (“nine‐eleven”) as a natural test of the hypothesis that closed‐end mutual fund discounts from fund net asset values reflect small investor sentiment. Because nine‐eleven was a sudden, unforeseen, and significantly negative and exogenous shock to the...

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Bibliographic Details
Published in:The Financial review (Buffalo, N.Y.) N.Y.), 2003-11, Vol.38 (4), p.515-529
Main Authors: Burch, Timothy R., Emery, Douglas R., Fuerst, Michael E.
Format: Article
Language:English
Subjects:
Closed end funds
closed-end fund discounts
G14
Hypotheses
Investment policy
Investor behavior
investor sentiment
Studies
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Summary:We use the horrific events of September 11, 2001 (“nine‐eleven”) as a natural test of the hypothesis that closed‐end mutual fund discounts from fund net asset values reflect small investor sentiment. Because nine‐eleven was a sudden, unforeseen, and significantly negative and exogenous shock to the world, the capital markets, and investor sentiment, our test avoids many of the problems of extant studies. Discounts worsened dramatically following the event, and then recovered alongside the broader market. This finding is consistent with the hypothesis that discounts reflect the sentiment of small investors, who took their cues from the broader market's overall movement.
ISSN:0732-8516
1540-6288
DOI:10.1111/1540-6288.00058