One new theoretical as well as empirical study on close-end fund discount puzzle
Based on option decomposition approach and no-arbitrage pricing theory, the paper discloses that incomplete market is the theoretical basis of close-end fund discounts. Furthermore, through introducing one static correction factor as well as one dynamic correction factor, the paper builds a series of new models mainly based on risk-free zero-coupon bonds pricing. Then based on fund data with panel structure in China, empirical study proves that period fixed effect model with Period SUR approach is the best among all models.It is also proved that the period fixed effects is more significant than cross-section fixed effects on close-end fund discounts in China. In addition, the empirical study measured the incomplete degree of china financial markets. Finally, the paper reasonably answers four aspects on the discount puzzle with our new theory framework and puts forward some advice to lower discount level of close end funds.
close-end fund discount option decomposition incomplete marke
LI Qing-feng
School of Economic & Management and South China Market Economy Research Center,South China Normal University,TX 86-20-85212678,China
国际会议
International Symposium on Financial Engineering and Risk Management(2008年金融工程与风险管理)
上海
英文
217-223
2008-06-01（万方平台首次上网日期，不代表论文的发表时间）