Closed-End Country Funds and U.S. Market Sentiment

THE REVIEW OF FINANCIAL STUDIES, Vol. 8 No. 3

Posted: 25 Jul 1998

See all articles by James N. Bodurtha

James N. Bodurtha

Georgetown University - Department of Finance

Dong-Soon Kim

Chung-Ang University

Charles M.C. Lee

Stanford University - Graduate School of Business

Abstract

Closed-end country funds can trade at large premiums and discounts from their foreign asset values (NAVs). Investigating this anomaly, we find that individual fund premiums move together, primarily because of the comovement of their stock prices with the U.S. market. Moreover, an index of country fund premiums differentiates size-ranked U.S. portfolio returns, and forecasts country fund stock returns. These findings suggest that international equity prices are affected by local risk. In particular, we show that country fund premium movements reflect a U.S.-specific risk, which may be interpreted as U.S. market sentiment.

JEL Classification: F14

Suggested Citation

Bodurtha, James N. and Kim, Dong-Soon and Lee, Charles M.C., Closed-End Country Funds and U.S. Market Sentiment. THE REVIEW OF FINANCIAL STUDIES, Vol. 8 No. 3. Available at SSRN: https://ssrn.com/abstract=6925

James N. Bodurtha (Contact Author)

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-6351 (Phone)
202-687-4031 (Fax)

Dong-Soon Kim

Chung-Ang University ( email )

College of Business Administration 221, Heuksuk-dong
Seoul
Korea
82-2-820-5570 (Phone)
82-2-824-9685 (Fax)

Charles M.C. Lee

Stanford University - Graduate School of Business ( email )

Stanford Graduate School of Business
655 Knight Way
Stanford, CA 94305-5015
United States
650-721-1295 (Phone)

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