Noise-trading, Costly Arbitrage, and Asset Prices: Evidence from US Closed-end Funds
AbstractThe behavior of US closed-end funds is very different from that of the UK funds studied by Gemmill and Thomas (2002). There is no evidence that their discounts are constrained by arbitrage barriers, no evidence that higher expenses increase discounts and no evidence that replication risk increases discounts—but strong evidence that noise-trader risk is priced. The differences between US and UK funds may be due to the fact that small investors dominate US funds while institutional investors dominate UK funds, or because the sample selection method for the UK funds chooses only funds that are relatively easy to arbitrage.
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Bibliographic InfoPaper provided by Vassar College Department of Economics in its series Vassar College Department of Economics Working Paper Series with number 71.
Date of creation: Sep 2005
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Other versions of this item:
- Flynn, Sean Masaki, 2012. "Noise-trading, costly arbitrage, and asset prices: Evidence from US closed-end funds," Journal of Financial Markets, Elsevier, vol. 15(1), pages 108-125.
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
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