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Author: Yves Trudel
Publisher:
ISBN:
Category : Closed-end funds
Languages : en
Pages : 0
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Book Description
Despite the simplicity of their operations and the pricing of their underlying assets, closed-end funds are associated with some of the most puzzling anomalies in finance. Thus, the primary purpose of this thesis is to show why funds (especially closed-end funds) exist, why the variance of mutual fund returns can exceed the variance of the returns on their investment portfolios in a rational market, and how properly chosen remuneration schemes for fund managers lead to better fund pricing. Each of these topics constitutes a self-contained essay or chapter in the thesis. In the first essay, we demonstrate under which conditions closed-end mutual funds exist. In general, the time horizons of small investors must be in a range that eliminates the incentives for them to invest directly in investment projects while allowing managed investment fund managers to realize non-negative profits. The specific existence of closed-end mutual funds is related to the opportunity for some investors to liquidate their fund's shares before the termination of the fund and to the flexibility that open-end fund managers have to liquidate their assets under management. As the likelihood of "bank run" increases, so does the likelihood of issuing closed-end mutual funds. In the second essay, we challenge the current belief in finance that, if investors are rational, then the variance of the returns for the shares or units of a closed-end fund should equal the variance of the returns of the net asset value per share (NAVPS) of the portfolio of assets under management by the fund. We demonstrate that various factors lead to excess price variability, so that the ratio of price to NAVPS variances exceeds one in a rational market. These factors include a differential impact of the bid/ask bounce, potential fund liquidation, performance persistence, management fees, and payout policy. In the third essay, we demonstrate that well-chosen remuneration schemes can help investors to properly value the securities of closed-end funds in primary markets so as to better reflect the abilities of its managers. In contrast, the current compensation structures that are typically based on flat fees may induce good managers to exit the closed-end fund sector, and may leave this sector with managers that generate returns that are relatively low compared to their management fees. In turn, this may explain why such funds typically sell at a discount to their net asset value per share shortly after an initial public offering.
Author: Yves Trudel
Publisher:
ISBN:
Category : Closed-end funds
Languages : en
Pages : 0
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Book Description
Despite the simplicity of their operations and the pricing of their underlying assets, closed-end funds are associated with some of the most puzzling anomalies in finance. Thus, the primary purpose of this thesis is to show why funds (especially closed-end funds) exist, why the variance of mutual fund returns can exceed the variance of the returns on their investment portfolios in a rational market, and how properly chosen remuneration schemes for fund managers lead to better fund pricing. Each of these topics constitutes a self-contained essay or chapter in the thesis. In the first essay, we demonstrate under which conditions closed-end mutual funds exist. In general, the time horizons of small investors must be in a range that eliminates the incentives for them to invest directly in investment projects while allowing managed investment fund managers to realize non-negative profits. The specific existence of closed-end mutual funds is related to the opportunity for some investors to liquidate their fund's shares before the termination of the fund and to the flexibility that open-end fund managers have to liquidate their assets under management. As the likelihood of "bank run" increases, so does the likelihood of issuing closed-end mutual funds. In the second essay, we challenge the current belief in finance that, if investors are rational, then the variance of the returns for the shares or units of a closed-end fund should equal the variance of the returns of the net asset value per share (NAVPS) of the portfolio of assets under management by the fund. We demonstrate that various factors lead to excess price variability, so that the ratio of price to NAVPS variances exceeds one in a rational market. These factors include a differential impact of the bid/ask bounce, potential fund liquidation, performance persistence, management fees, and payout policy. In the third essay, we demonstrate that well-chosen remuneration schemes can help investors to properly value the securities of closed-end funds in primary markets so as to better reflect the abilities of its managers. In contrast, the current compensation structures that are typically based on flat fees may induce good managers to exit the closed-end fund sector, and may leave this sector with managers that generate returns that are relatively low compared to their management fees. In turn, this may explain why such funds typically sell at a discount to their net asset value per share shortly after an initial public offering.
Author: Anita K. Sigler
Publisher:
ISBN:
Category : Bonds
Languages : en
Pages : 232
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Book Description
Author: Seth Anderson
Publisher: Springer Science & Business Media
ISBN: 1475736339
Category : Business & Economics
Languages : en
Pages : 106
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Book Description
Closed-End Investment Companies (CEICs) have experienced a significant revival of interest, both as investment vehicles and as the subject of academic research, over the past decade. This academic research has focused on the nature of closed-end funds' discounts and premiums and on the share price behavior of these firms. The first book by the authors, "Closed-End Investment Companies: Issues and Answers," addresses closed-end fund academic articles published prior to 1991. This second book addresses those articles that have appeared since that time. Closed-End Fund Pricing: Theories and Evidence is designed for the academic researcher interested in CEICs and the practitioner interested in using CEICs as an investment vehicle. The authors summarize the evolution of CEICs, present the factors thought to cause CEIC shares to trade at different levels from their net asset values, provide a complete survey of the recent academic literature on this topic, and summarize the current state of research on CEICs.
Author: Gary Paul McCormick
Publisher:
ISBN:
Category : Closed-end funds
Languages : en
Pages :
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Book Description
Closed end funds provide a unique asset class for academic research due to that fact that they typically trade at a price different from the Net Asset Value (NAV). This is known as the discount. The first essay examines that voluntary change from weekly to daily NAV reporting. Surprisingly, this additional information generates greater information asymmetry. This supports the theory that a skilled subset of investors can exploit public information by processing it into private information and/or opinion. The result is that these funds are riskier, have greater transaction costs. The second essay examines the hypothesis that discount is the price investors are willing to pay for future performance. Earlier work found that the hypothesis is true for equity funds but not bond funds. The findings here are that the relation has changed over time. The hypothesis now holds for international funds (bond and equity) but not domestic funds. The third essay studies the timing ability of fixed income closed end fund managers. Fund flows may hamper (open) mutual fund managers' performance. Fixed income portfolio management should be more an issue market and interest timing due to the fact that bonds of the same characteristics (yield, duration, coupon and credit rating) are close substitutes. The findings are of no timing ability, but also, no evidence of the perverse that is common in the literature.
Author: Michael Jonathan Vilbert
Publisher:
ISBN:
Category :
Languages : en
Pages : 188
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Author: Jian Huang
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Author: William D. Allen
Publisher:
ISBN:
Category : Closed-end funds
Languages : en
Pages :
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Book Description
This dissertation examines two aspects of closed-end funds (CEF). First, a limited number of these funds maintain the historical management structure of internally allocating resources to investments as opposed to hiring an advisor external to the fund to position and administer the fund. Many in the managed fund universe, such as George Clark, claim shareholders are paying an onerous performance burden by investing in funds with the external management model. While I do find the internally managed funds exhibit significantly lower expense ratios than their externally managed peers, I do not find that these lower expenses translate to lesser discounts from NAV nor do they result in any superior performance except in the longest of horizons. I conclude that claims of an onerous tax inherent in the external management model to be erroneous. Second, a portion of trading profit from insider trading has been ascribed to an omniscience of firm prospects. Due to a known portfolio of assets and little proprietary knowledge, closed-end funds provide a very stable environment in which to examine insider trading. While I do find significant insider trading relative to the fund's discount, I do not find this to be evidence of any omniscience, but merely a trading strategy based on the mean-reverting nature of the fund discount. This is a trading strategy available to all investors, not merely the insiders. I conclude that some aspects of insider trading regulation and governance reform in the managed fund arena may be overly onerous.
Author: Seth Anderson
Publisher: Springer Science & Business Media
ISBN: 1441901671
Category : Business & Economics
Languages : en
Pages : 132
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Book Description
"Closed-End Funds, Exchange-Traded Funds, and Hedge Funds: Origins, Functions, and Literature is a concise and valuable book that will be of interest to individual investors, financial professionals, and academic researchers, alike. It provides a brief history and institutional discussion of these investment companies and also presents a summary of the research on these funds. Investment practitioners will find the book useful as a reference and as a quick refresher on the current state of knowledge regarding each fund type. Equally important, it provides academic researchers with an accurate institutional framework within which to cast their theoretical models, and a point of departure for expanding the empirical analysis for improving our understanding of these funds. All-in-all, this is a very valuable book; I highly recommend it." (John J. Jackson, Professor of Economics, Auburn University) "Professors Anderson, Born, and Schnusenberg provide a valuable service in this monograph. The practical significance of closed-end funds, exchange-traded funds, and hedge funds has increased dramatically in recent years, but all too many academics and investors know little about them. This text presents a carefully-focused and understandable description of these investment vehicles, highlighting the big, unresolved questions, while also including careful and fair accounts of the state of the literature. Nothing extraneous clutters the presentation, but, more importantly, nothing necessary is left out. Highly recommended." (T. Randolph Beard, Professor of Economics and Public Policy, Auburn University) "This book is both useful as a reference book and as an additive, educational overview of ETFs and hedge funds, as well as CEFs. In today’s tumultuous markets, much reference is made to these subjects without a clear understanding of the vehicles, their structure and their history. This is a very timely publication and should be viewed as an important read. The book contains definitive explanations and also includes an excellent summary of past works in this area. Readable, informative and highly useful as a reference source." (Kathleen A. Wayner, President and CEO, Bowling Portfolio Management)
Author: Seth Anderson
Publisher: Springer
ISBN: 9781475736342
Category : Business & Economics
Languages : en
Pages : 102
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Book Description
Closed-End Investment Companies (CEICs) have experienced a significant revival of interest, both as investment vehicles and as the subject of academic research, over the past decade. This academic research has focused on the nature of closed-end funds' discounts and premiums and on the share price behavior of these firms. The first book by the authors, "Closed-End Investment Companies: Issues and Answers," addresses closed-end fund academic articles published prior to 1991. This second book addresses those articles that have appeared since that time. Closed-End Fund Pricing: Theories and Evidence is designed for the academic researcher interested in CEICs and the practitioner interested in using CEICs as an investment vehicle. The authors summarize the evolution of CEICs, present the factors thought to cause CEIC shares to trade at different levels from their net asset values, provide a complete survey of the recent academic literature on this topic, and summarize the current state of research on CEICs.
Author: Sujung Choi
Publisher:
ISBN: 9781267533203
Category :
Languages : en
Pages : 112
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Book Description
This dissertation consists of two essays. In the first essay, "Investor misvaluation, signaling, and takeovers: Evidence from closed-end fund discounts", I investigate investor misvaluation as a motivation for closed-end fund mergers and acquisitions (M & As). Following previous studies, I view the closed-end fund discount as a proxy for investor misvaluation at the individual fund level. When a closed-end fund suffers from investor misvaluation in the stock market, closed-end fund M & As can be served to investors to signal a rosy prospect for the closed-end fund, or a synergy effect. Using comprehensive data of closed-end fund M & As from 1994 through 2009, I find that (1) both acquirer and target funds experience deep fund discounts over pre-announcement periods and (2) acquirer funds are less likely to be undervalued than target funds, and target funds are more deeply undervalued than acquirer funds when M & As occur. After M & A announcements, fund discounts shrink for targets, but go slightly deeper for acquirers. In the long run, fund discounts of the combined funds shrink even for acquirers, and the misvaluation on acquirer and target closed-end funds is corrected. Post-merger objective-adjusted performance initially improves for both acquirer and target funds because of the synergies perceived by investors, but generally worsens on average in the third year following the M & As. In the second essay, "Herding among individual investors in the Korean stock market", I investigate whether herding among local individual investors exists in the Korean stock market. I examine the hypothesis of whether a potential investor's decision, such as picking a particular stock within a given period, correlates with the decisions of neighbors living in the same area. Using a unique dataset on individual online and offline trading obtained from a brokerage firm in Korea, I analyze the buying and selling transactions of 10,000 individual accounts from February 1999 to December 2005. By employing the herding measure proposed by Lakonishok, Shleifer, and Vishny (1992), I report that individual investors herd on a given stock-month and stock-day. Offline investors in the same local area exhibit stronger herding compared to online investors. Using OLS regressions, I find that own-area effects, or correlated trades by individual investors who are geographically close, are stronger compared to other-area effects in both contemporaneous and lagged coefficients. Investors who are male, wealthy, and non-religious tend to invest more in the stock market compared to investors who are female and Protestant.
