Closed-end Country Funds and U.S. Market Sentiment

Closed-end country funds can trade at large premiums and discounts from their foreign asset values (NAVs). Investigating this anomaly, we find that individual fund premiums move together, primarily because of the comovement of their stock prices with the U.S. market. Moreover, an index of country fu...

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Bibliographic Details
Published in:The Review of financial studies 1995-10, Vol.8 (3), p.879-918
Main Authors: Bodurtha, James N., Kim, Dong-Soon, Charles M. C. Lee
Format: Article
Language:English
Subjects:
1993 RFS/WFA Symposium on International Financial Markets and Prices
Assets
Capital assets
Closed end investment companies
Discounts
Equity
Foreign exchange rates
Index funds
Investigations
Investment risk
Investments
Investor behavior
Investors
Market prices
Market segmentation
Meetings
Optimism
Pessimism
Portfolio management
Price premiums
Prices
Rates of return
Retroaction
Risk factors
Stock market indices
Stock prices
Stock returns
Time series
U.S.A
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Summary:Closed-end country funds can trade at large premiums and discounts from their foreign asset values (NAVs). Investigating this anomaly, we find that individual fund premiums move together, primarily because of the comovement of their stock prices with the U.S. market. Moreover, an index of country fund premiums differentiates size-ranked U.S. portfolio returns and forecasts country fund stock returns. These findings suggest that international equity prices are affected by local risk. In particular, we show that country fund premium movements reflect a U.S.-specific risk, which may be interpreted as U.S. market sentiment.
ISSN:0893-9454
1465-7368
DOI:10.1093/rfs/8.3.879