EXPLAINING PREMIUMS AND DISCOUNTS ON CLOSED-END EQUALITY COUNTRY FUNDS

Over the past decade or so, the surge of interest among U.S. investors in international investing has led to the creation of numerous foreign equity country funds. Like U.S. closed-end mutual funds, the prices of such closed-end country funds fluctuate widely in relation to their underlying net asset values (NAVs).
In this paper, the authors summarize the major findings of their recent study of the performance of 28 country funds relative to their NAVs over the period 1978–1995. While 20 of the 28 funds traded at average discounts to their net asset values, the discounts for the country funds were smaller than those of the average U.S. fund, and over a quarter of the funds sold at premiums.
In an attempt to explain such premiums or discounts, the authors examined primarily three factors: (1) the sensitivity of country-fund returns (relative to that of local market indices) to U.S. returns; (2) the possible effects of local government investment restrictions; and (3) the impact of exchange rate changes. Although most of the eight funds that traded at average premiums represented countries with significant restrictions on capital flows and foreign ownership, there were also a number of funds with similar restrictions trading at significant discounts. In exploring the reasons for such discounts, the authors noted that the returns to the country funds were "surprisingly sensitive" to U.S. market conditions, thus reducing the extent of their diversification benefits for U.S. investors. The article also raises the possibility that if such country funds are not "priced at the margin" by globally diversified investors, U.S investors' "country-risk sentiments" could cause such funds to trade at discounts.     

INVESTOR TAX-TRADING OPPORTUNITIES AND DISCOUNTS ON CLOSED-END MUTUAL FUNDS

Discounts on closed-end mutual funds are a puzzle to financial economists, because arbitrage activities should eliminate discounts in a perfect capital market. In this paper I develop a model that explains discounts, using Merton's option pricing theorem. By holding shares of a closed-end mutual fund, investors lose valuable tax-trading opportunities associated with the constituent securities of the closed-end mutual fund's portfolio. However, investors can take advantage of all tax-trading opportunities by directly holding the closed-end mutual fund's portfolio. I also show that both variances of individual securities and correlations among securities in the portfolio are important factors in determining the magnitude of discounts.     

A RE-EXAMINATION OF THE RELATIONSHIP BETWEEN CLOSED-END FUND DISCOUNTS AND EXPENSES

In this paper the role of expenses in explaining closed-end fund discounts is re-examined. A present value model is developed to illustrate the relationship between expenses and discounts. Earlier studies find that discounts are not related to management fees. In this paper, using a larger sample over a longer and different period and a better specification of the expense variable consistent with the model developed, discounts are found to be significantly related to expenses. The relationship between expenses and discounts holds in the presence of other control variables.     

PRICE PRESSURE AND THE ROLE OF INSTITUTIONAL INVESTORS IN CLOSED-END FUNDS

A trader-identified transactions database is employed to investigate: (1) the relation between order-flow imbalance and closed-end fund share prices and discounts; and (2) the role of institutional investors in closed-end funds. Empirical results are consistent with the hypothesis that buyers (sellers) of closed-end funds face upward-downward-) sloping supply (demand) curves. The results also demonstrate that ownership statistics do not accurately reflect institutional investors' importance in the closed-end fund market. The results fail to provide evidence that institutional investors offset the positions of individual investors or that institutional investors face systematic “noise trader risk.”     

A POSSIBLE RECONCILIATION OF SOME OF THE CONFLICTING FINDINGS ON CLOSED-END FUND DISCOUNTS: A NOTE

The most obvious explanation for the closed-end fund puzzle, the existence of managerial contribution (i.e., managerial performance less managerial fees), has been called into disrepute because of the inability of researchers to consistently document a negative relationship between such benefits and discounts. We present a model which shows that it is possible to account for some of the stylized facts without abandoning market efficiency and rationality. It is suggested that when one takes into consideration the impact of managerial contribution on the probability of open-ending, a negative relationship between managerial contribution and discounts actually may result.     

THE PERFORMANCE OF UK CLOSED-END FUNDS: A COMPARISON OF THE VARIOUS RANKING CRITERIA

This study considers the performance of UK Investment Trusts over the ten-year period 1968 to 1977, using the major criteria suggested in the literature. The results indicate that UK closedend funds were generally inferior (ex post) to the market portfolio (FT Actuaries All-Share Index). These findings were invariant to the particular peiformance methodology selected. When the overall test period was broken up into sub-periods it was also found that the ex post performance findings were not particularly stable or consistent over time. These results highlight the problems a fund investor would face in attempting to predict future fund performance on the basis of historical results.     

MUTUAL FUNDS SELECTION BASED ON FUNDS CHARACTERISTICS

The popular investment strategy in the literature is to use only past performance to select mutual funds. We investigate whether an investor can select superior funds by additionally using fund characteristics. After considering the fund fees, we find that combining information on past performance, turnover ratio, and ability produces a yearly excess net return of 8.0%, whereas an investment strategy that uses only past performance generates 7.1%. Adjusting for systematic risks, and then using fund characteristics, increases yearly alpha significantly from 0.8% to 1.7%. The strategy that also uses fund characteristics requires less turnover.     

BID-ASK SPREAD AND OWNERSHIP STRUCTURE

In this paper we examine the relation between bid-ask spread and ownership structure variables based on 1985 data for 1,063 NYSE firms. We document a nonpositive relation between bid-ask spread and insider ownership and conclude that spread is unrelated to insider trading. We also find a robust significantly negative relation between spread and institutional ownership. Finally, we find a positive but generally insignificant relation between spread and blockholdings. Overall, our evidence does not support the predictions of asymmetric information models in markets with anonymous trading.     

INVESTMENT TRUST DISCOUNTS AND ABNORMAL RETURNS: UK EVIDENCE

Attempts to explain the apparent anomaly of the discount to Net Asset Value of investment trust (or closed-end fund) shares have had little success. The present study of UK monthly data finds that investment trust shares selected on the basis of high (low) discounts tend to experience high (low) abnormal returns in the year following selection, which implies mean reversion in the discounts and hence market inefficiency. Furthermore, evidence is presented that the Net Asset Value and the price of investment trust shares are cointegrated, which implies the existence of profitable trading rules based on the identification of Error Correction Mechanisms.     

FOUNDING FAMILY OWNERSHIP AND CASH HOLDINGS

I investigate the relation between founding family ownership and firm cash holdings. I find that cash holdings are significantly lower at family firms than nonfamily firms. I also examine the marginal value of cash and report a smaller value of cash for family firms. Combined, the findings are consistent with the spending hypothesis that family firms tend to deploy cash quickly and the market discounts the quality of their spending.     

对我国预算外资金管理的思考

预算外资金是指不纳入预算管理,但却用于满足政府履行其职能需要的财政性资金。目前．我国预算制度改革与完善的目标是使预算制度适应社会主义市场经济体制的要求和政府职能转变的需要。然而,很多政府承担的职能并不是通过预算来实现的,而是通过预算外资金和非预算的财政性资金来完成的。由于对预算外资金认识上的滞后和政策、管理手段的缺位．