Holding Companies Discounts: Some Evidence from the Milan Stock Exchange
EFMA 2001 Lugano Meetings
63 Pages Posted: 19 May 2000
Date Written: March 22, 2000
Holding Companies (HCs) Discount/Premium (Q_i) is investigated over the period 1960-1996. In a rational pricing framework, HCs are examined as a closed end fund and a as a corporate governance tool. The main findings are that managerial contribution, extra profitability on NAV minus general overhead expenses are significant in HC evaluation. Even the HC role in stock pyramiding schemes is rationally discounted by the market. Finally, in a behavioral finance framwork, HCs discount is found as an aggregate market sentiment index for the Milan Stock Exchange. A profitable trading rule is deviced to exploit the predictive power of Q_i.
JEL Classification: G10, G32, G34
Suggested Citation: Suggested Citation