Abstract

http://ssrn.com/abstract=883632
 
 

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The Forecasting Power of Emerging Market Closed-end Fund Discounts and Capital Market Segmentation


George Nishiotis


University of Cyprus - Department of Public and Business Administration

Andreas K. Makris


PricewaterhouseCoopers

February 2006


Abstract:     
Using monthly data from 1989 to 2001 for a sample of ten emerging market closed-end funds, we study the time-series relationship between fund discounts/premiums and future net asset value (NAV) and share price (SP) returns. Unlike previous studies, we find that discounts/premiums forecast both SP and NAV returns with the forecasting power of the latter being stronger. Additional tests show that the fund discounts/premiums contain information about future macroeconomic factors of their corresponding emerging markets. We also document a strong association between expectations of future macroeconomic conditions and the difference in SP and NAV returns. Our results provide support for a rational market segmentation explanation of the discounts/premiums in emerging market closed-end funds and they are not consistent with a straight forward investor sentiment explanation.

Number of Pages in PDF File: 35

Keywords: Closed-end funds, Emerging markets, Capital market segmentation, Investor sentiment

JEL Classification: G15

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Date posted: February 23, 2006  

Suggested Citation

Nishiotis, George and Makris, Andreas K., The Forecasting Power of Emerging Market Closed-end Fund Discounts and Capital Market Segmentation (February 2006). Available at SSRN: http://ssrn.com/abstract=883632 or http://dx.doi.org/10.2139/ssrn.883632

Contact Information

George P. Nishiotis (Contact Author)
University of Cyprus - Department of Public and Business Administration ( email )
75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
Cyprus
357 22893617 (Phone)
357 22892460 (Fax)
Andreas K. Makris
PricewaterhouseCoopers ( email )
54 Gill Street
New Plymouth 4310
New Zealand
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