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Noise-trading, costly arbitrage, and asset prices: Evidence from US closed-end funds

  • Flynn, Sean Masaki

The behavior of US closed-end funds is very different from that of UK funds. There is no evidence that the US funds' 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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Article provided by Elsevier in its journal Journal of Financial Markets.

Volume (Year): 15 (2012)
Issue (Month): 1 ()
Pages: 108-125

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Handle: RePEc:eee:finmar:v:15:y:2012:i:1:p:108-125
Contact details of provider: Web page: http://www.elsevier.com/locate/finmar

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  7. Steven A. Ross, 2002. "Neoclassical Finance, Alternative Finance and the Closed End Fund Puzzle," European Financial Management, European Financial Management Association, vol. 8(2), pages 129-137.
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