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Portfolio concentration and closed-end fund discounts: Evidence from the China market

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  • Chan, Kalok
  • Kot, Hung Wan
  • Li, Desmond

Abstract

This paper provides an analysis of the determinants of the closed-end fund discount in Mainland China. We focus on the diversification level of closed-end funds as the investor clienteles for closed-end funds in Mainland China are different from other markets. Our empirical evidence shows that discount is strongly and negatively related to stock concentration as measured by the number of stocks in the fund or Herfindahl index. We also find the discount decreases with the dividend payout and turnover, suggesting that investors are willing to pay a higher price (lower discount) for a fund that pays more dividends and has higher turnover.

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  • Chan, Kalok & Kot, Hung Wan & Li, Desmond, 2008. "Portfolio concentration and closed-end fund discounts: Evidence from the China market," Emerging Markets Review, Elsevier, vol. 9(2), pages 129-143, June.
    • Handle: RePEc:eee:ememar:v:9:y:2008:i:2:p:129-143
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    3. Wang, Yang & Ashton, John K. & Jaafar, Aziz, 2019. "Does mutual fund investment influence accounting fraud?," Emerging Markets Review, Elsevier, vol. 38(C), pages 142-158.
    4. Farhana Rahman, 2022. "Discount Puzzle Of Closed-End Mutual Funds: A Case Of Bangladesh," Papers 2209.13102, arXiv.org.

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