Crises, Contagion, and the Closed-End Country Fund Puzzle

54 Pages Posted: 15 Feb 2006  

Eduardo Levy Levy-Yeyati

Universidad Torcuato Di Tella - School of Business

Angel Ubide

affiliation not provided to SSRN

Multiple version iconThere are 3 versions of this paper

Date Written: September 1998

Abstract

This paper analyzes the behavior of closed-end country fond discounts, including evidence from the Mexican and East Asian crises. We find that the ratio of fund prices to their fundamental value increases dramatically during a crisis, an anomaly that we denote the "closed-end country fund puzzle." Our results show that the puzzle relates directly to the fact that international investors are less (more) sensitive to changes in local (global) market conditions than domestic investors. This asymmetry implies that foreign participation in local markets can both help dampen a crisis in the originating country, and amplify the contagion to noncrisis countries.

Keywords: Country Funds, Contagion, Financial Crisis

JEL Classification: G1, E3

Suggested Citation

Levy-Yeyati, Eduardo Levy and Ubide, Angel, Crises, Contagion, and the Closed-End Country Fund Puzzle (September 1998). IMF Working Paper, Vol. , pp. 1-54, 1998. Available at SSRN: https://ssrn.com/abstract=882710

Eduardo Levy Levy-Yeyati (Contact Author)

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

Angel Ubide

affiliation not provided to SSRN

No Address Available

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