Diversification Benefits of iShares and Closed-End Country Funds

We study the performance and diversification of iShares and their rival closed‐end country funds from April 1996 to December 1999. International iShares are country‐specific series of securities that track the price and yield of a specific Morgan Stanley Capital Internation (MSCI) country index and, presumably, should provide diversification benefits. Our single‐index model demonstrates that iShares replicate the home index, showing some potential for diversification. However, our two‐factor model, which isolates the “true” diversification virtues, documents that both iShares and closed‐end country fund market prices maintain considerable exposure to the U.S. market. Furthermore, the net asset value returns of the closed‐end funds demonstrate a strong home country exposure, suggesting there is no substitute for direct foreign investment.     

Around-the-Clock Performance of Closed-End Funds

Herein, we find that the market price of closed-end fund shares tends to increase (decrease) in anticipation of a rise (fall) in the net asset value (NAV). Similarly, an increase (decrease) in the reported NAV tends to be followed by a rise (fall) in the price of the fund's shares. Interestingly, we also find a powerful negative autocorrelation between closed-end fund shares’ overnight and intraday returns in both univariate and multivariate tests for both the overall sample and a number of subsamples. We believe that this tendency results from the strategies that many specialists employ when they open their assigned shares.     

Closed-End Funds: A Survey

This survey reviews the evolving literature on closed-end fund discounts. Many studies have attempted to explain the existence and the behavior of the discount to net asset value, emphasizing biases in the calculation of NAV, agency costs, tax-timing options and market segmentation. None has been able to provide a full explanation. As a result, some researchers have found it necessary to resort to models of limited rationality. This gives rise to potential opportunities for exploiting the discount. We summarize the findings from over 70 studies of closed-end funds, and present directions for future research.     

A Liquidity-Based Theory of Closed-End Funds

This paper develops a rational, liquidity-based model of closed-endfunds (CEFs) that provides an economic motivation for the existenceof this organizational form: They offer a means for investorsto buy illiquid securities, without facing the potential costsassociated with direct trading and without the externalitiesimposed by an open-end fund structure. Our theory predicts thepatterns observed in CEF initial public offerings (IPOs) andthe observed behavior of the CEF discount, which results froma trade-off between the liquidity benefits of investing in theCEF and the fees charged by the fund's managers. In particular,the model explains why IPOs occur in waves in certain sectorsat a time, why funds are issued at a premium to net asset value(NAV), and why they later usually trade at a discount. We alsoconduct an empirical investigation, which, overall, providesmore support for a liquidity-based model than for an alternativesentiment-based explanation.     

Canadian Investors and the Discount on Closed-End Funds

We explore the role of the discount on closed-end funds (CEFD) in asset pricing and test its validity as a proxy for investor sentiment in the Canadian stock market. Results show that CEFD is not a priced factor. Both cross-sectional and time-series tests confirm that stocks with different exposures to CEFD do not have significantly different average returns. CEFD does not even provide incremental explanatory power after controlling for firm characteristics and risk factors. Furthermore, CEFD fails to be a proxy for investor sentiment with no correlation to either the consumer confidence index or flows to open-ended funds.     

Corporate Spin-Offs and Closed-End Funds in a State-Preference Framework

Miller's clientele argument for market value subadditivity as an explanation for stockholder wealth gains in corporate spin-offs and discounts from the net asset value of closed-end fund shares is examined in the context of a simple state-preference model. It is shown that binding short sales constraints induce value subadditivity and thus render Miller's clientele argument valid. This is true regardless of whether or not divergence of opinion among investors or state-dependent utility functions exist. In the absence of binding short sales constraints, value additivity prevails and Miller's clientele argument is not viable. Although personal taxes are not considered in the model developed in this paper, it is shown that tax-timing options reinforce the existence of value subadditivity.     

Market Integration and Investment Barriers in Emerging Equity Markets

This article develops a return-based measure of market integrationfor nineteen emerging equity markets. It then examines the relationbetween that measure, other return characteristics, and broadlydefined investment barriers. Although the analysis is exploratory,some clear conclusions emerge. First, global factors accountfor a small fraction of the time variation in expected returnsin most markets, and global predictability has declined overtime Second, the emerging markets exhibit differing degreesof market integration with the U.S. market, and the differencesare not necessarily associated with direct barriers to investment.Third, the most important de facto barriers to global equity-marketintegration are poor credit ratings, high and variable inflation,exchange rate controls, the lack of a high-quality regulatoryand accounting framework, the lack of sufficient country fundsor cross-listed securities, and the limited size of some stockmarkets.     

Investor Reaction to Salient News in Closed-End Country Funds

We use panel data on prices and net asset values to test whether dramatic country-specific news affects the response of closed-end country fund prices to asset value. In a typical week, prices underreact to changes in fundamentals; the (short-run) elasticity of price with respect to asset value is significantly less than one. In weeks with news appearing on the front page of The New York Times , prices react much more; the elasticity of price with respect to asset value is closer to one. These results are consistent with the hypothesis that news events lead some investors to react more quickly.     

Common Volatility: An Empirical Investigation of Closed-End Country Funds

The study of international integration of equity markets has received a great deal of interest. This paper investigates whether returns of forty-one closed-end country funds share a common volatility process with three comparable return series: the underlying net asset value (NAV), U.S. stock market returns, and foreign stock market returns. Country funds are a natural setting to test for international market integration, as they are traded in the U.S. market, whereas their underlying assets are traded in foreign stock markets. Our results indicate that only a few emerging markets' country funds share common volatility processes with their comparable asset returns. This, in turn, suggests weak linkages through the second moment of related assets.     

Pension Funds and Emerging Markets

This paper focuses on the investment behavior of pension funds in developed and emerging market countries. First, it analyzes the main determinants of the emerging market asset allocation of pension funds in developed countries. Second, it assesses how pension funds in emerging markets have contributed to the development of local securities markets. Third, it analyzes the determinants of pension funds' investment performance. The paper concludes with a discussion of why the emerging market asset allocation of pension funds in developed countries is likely to increase and what the challenges faced by pension funds in emerging markets are.     

Tax-Loss Selling and the January Effect: Evidence from Municipal Bond Closed-End Funds

This paper provides direct evidence supporting the tax‐loss selling hypothesis as an explanation of the January effect. Examining turn‐of‐the‐year return and volume patterns for municipal bond closed‐end funds, which are held mostly by tax‐sensitive individual investors, we document a January effect for these funds, but not for their underlying assets. We provide evidence that this effect can be largely explained by tax‐loss selling activities at the previous year‐end. Moreover, we find that funds associated with brokerage firms display more tax‐loss selling behavior, suggesting that tax counseling plays a role.     

Assessing Selectivity and Market Timing Performance of Mutual Funds for an Emerging Market: The Case of Turkey

This paper derives and analyzes the selectivity and market timing performance of the mutual funds for the Turkish economy for the financial crisis period by employing high-frequency data. The determinants of these derived abilities are investigated within a regression analysis. The results suggest weak evidence about selection ability and some evidence about superior market timing quality. They also indicate that management fees are negatively correlated with the ability measure, which is quite surprising. Experience emerges as an important factor, especially for market timing ability.     

Pacific Rim Stock Market Integration Under Different Federal Funds Rate Regimes

This study uses Sims-type vector autoregression technique to examine the stock markets integration among the US and four major Asian-Pacific stock exchanges during 1993 and 1994. The two different sample periods capture the change in US monetary policy in 1994. Empirical results show that when the US was targeting the federal funds rate in 1994, the variations in US stock returns much better explain the variations of stock returns in Hong Kong, Singapore and Australia.     

债券基金:箭在弦上

日前国内首只债券型开放式基金--南方宝元债券型基金获得了中国证监会的设立批复,预计将于今年8月上中旬正式发行.该基金管理人南方基金管理有限公司也因此成为国内首家同时管理两只开放式基金的基金管理公司.     

Export Quota Allocations, Export Earnings, and Market Diversification

Countries facing voluntary export restraints (VERS) often adopta two-tier allocation system for export licenses to the restrictedmarket; (1) a "basic" allocation related to export shares tothe restricted market; and (2) an "open" allocation based onexport shares to the nonrestricted market. Such a two-tier allocationsystem increases exports to the nonrestricted market beyondthe levels which would exist under a single-quota allocationsystem and has an efficiency cost as it results in some salesbeing made at less than marginal cost. The history of VER negotiationsprovides a rationale for such a policy and suggests that therecent increase in antidumping cases may be partly associatedwith the adoption of two-tier quota allocation systems.     

关键词：新兴市场

中国企业拓展海外新兴市场的“号角”已经吹响。相信所有有志于将企业做大、做强的企业决策者都会关注亚洲、非洲、拉美等新兴市场的机会,选择恰当的时机大展拳脚。     

Global Property Market Diversification

This paper examines global diversification benefits provided by developed property markets over 1992–2007. We employ a cointegration methodology, invariant to pair-wise correlational instability plaguing MPT approaches, to investigate regional and country property market diversification benefits for U.S. domiciled global real estate investors. We show, theoretically and empirically, the cointegration procedure aptly identifies markets integrated by common trends that mitigate diversification potential. We show global property markets are interregionally independent but find intraregional market cointegration. A portfolio of markets independent of cointegrating relationships performs best during the period but is insufficiently diversified relative to a cointegrated portfolio. Independent country markets do account for the bulk of global property diversification gains but cointegrated markets, particularly from the North American and Asia Pacific regions, retain some diversifying qualities. We also show cointegrated markets converge toward benchmark characteristics, reducing their attraction as portfolio candidates.