Brickley, James A Manaster, Steven Schallheim, James
Abstract
For all options, including tax-timing options, a portfolio of options is more valuable than an option on the corresponding portfolio. This observation is consistent with the puzzling empirical regularity that closed-end funds sell at discounts from their net asset value. Consistent with this theory, the authors' results show that, cross-sectionally, the discounts are positively correlated with the average variance of the constituent assets in the fund and that in time series the value of the discount varies countercyclically. Estimation of a specific model was not sufficiently precise to provide additional insights into the pricing of tax-timing options. Copyright 1991 by University of Chicago Press.
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Article provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 64 (1991) Issue (Month): 3 (July) Pages: 287-312 Download reference. The following formats are available: HTML
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