Crises, Contagion, and the Closed-End Country Fund Puzzle
AbstractThis paper analyzes the behavior of closed-end country fund discounts, including evidence from the Mexican and East Asian crises. It finds 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 help dampen the effect of a crisis in asset prices in the originating country, at the cost of amplifying contagion to noncrisis countries. Copyright 2000, International Monetary Fund
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 98/143.
Date of creation: 01 Sep 1998
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- Eduardo Levy-Yeyati & Angel Ubide, 2000. "Crises, Contagion, and the Closed-End Country Fund Puzzle," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 3.
- G1 - Financial Economics - - General Financial Markets
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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