Does Sentiment Predict UK Closed-End Country Fund Pricing?

35 Pages Posted: 17 Jul 2014

See all articles by John Richard (Dick) Davies

John Richard (Dick) Davies

University of Strathclyde - Department of Accounting and Finance

Mary Fletcher

University of the West of Scotland; University of Strathclyde - Department of Accounting and Finance

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School

Date Written: July 16, 2014

Abstract

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

Davies, John Richard (Dick) and Fletcher, Mary and Marshall, Andrew P., Does Sentiment Predict UK Closed-End Country Fund Pricing? (July 16, 2014). Available at SSRN: https://ssrn.com/abstract=2467180 or http://dx.doi.org/10.2139/ssrn.2467180

John Richard (Dick) Davies

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom

Mary Fletcher (Contact Author)

University of the West of Scotland ( email )

A734 Almada Building
Almada Street
Hamilton, Scotland ML3 0JB
United Kingdom
01698 283100 x8272 (Phone)

University of Strathclyde - Department of Accounting and Finance ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom

Andrew P. Marshall

University of Strathclyde - Strathclyde Business School ( email )

100 Cathedral Street
Glasgow G4 0LN
United Kingdom
44 0141 548 3894 (Phone)

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