Does Sentiment Predict UK Closed-End Country Fund Pricing?
35 Pages Posted: 17 Jul 2014
Date Written: July 16, 2014
This paper examines whether foreign country consumer sentiment influences the pricing of closed-end country funds. It links the literature on investor sentiment and stock returns to the literature on sentiment and closed-end fund pricing. Using foreign country consumer sentiment indices, we examine the effect of sentiment on the pricing of UK closed-end country funds between 1992 and 2009. We find that foreign country consumer sentiment is a significant negative predictor of the share price and net asset value return over different time horizons. Our findings suggest that UK closed-end country funds are a good vehicle for diversification because their share prices reflect foreign market sentiment more than UK market sentiment.
Keywords: closed-end country funds, investment trusts, predictability, sentiment
JEL Classification: G14, G12
Suggested Citation: Suggested Citation