Discussion Paper Details

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Title: Greek Closed-End Fund Premia: Differences and Similarities with US Premia and Their Implications

Author(s): Gikas A Hardouvelis and Emmanuel D Tsiritakis

Publication Date: May 1996

Keyword(s): Arbitrage, Bank Subsidiary, Closed-End Fund, Common Factor, Excess Volatility, Fund Discount, Fund Premium, Market Friction, Mean Reversion, Measurement Error, Net Asset Value, Noise Trading, Over-senstivity, Predictive Ability and Small Investor

Programme Area(s): Financial Economics

Abstract: The prices of Greek closed-end funds behave similarly to the prices of US funds: they deviate substantially from their net asset values (NAVs); they are more volatile than their NAVs; and they are overly-sensitive to the movements of the domestic stock market index. Furthermore, their premia are: (i) positively correlated cross-sectionally; (ii) positively correlated with the future NAV returns; and (iii) negatively correlated with the future returns on the funds. Yet most Greek funds are subsidiaries of banks that have considerable influence on their pricing, whereas US funds are owned mainly by small investors. Future explanations to the closed-end fund puzzle should, therefore, transcend the narrow institutional characteristics of asset composition and ownership of US closed-end funds.

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Bibliographic Reference

Hardouvelis, G and Tsiritakis, E. 1996. 'Greek Closed-End Fund Premia: Differences and Similarities with US Premia and Their Implications'. London, Centre for Economic Policy Research.