IDEAS home Printed from https://ideas.repec.org/p/abn/wpaper/auwp2012-07.html
   My bibliography  Save this paper

Fear and Closed-End Fund Discounts

Author

Listed:
  • Seth Anderson
  • T. Randolph Beard
  • Hyeongwoo Kim
  • Liliana Stern

Abstract

Closed end fund (CEF) discounts have intrigued researchers for decades. Of the many explanations offered, the behavioural framework of Lee et al. (1991), which posits noise traders subject to sentiment, is the most discussed. In this article, we contribute some novel evidence to the evaluation of this theory by examining the role of implied market volatility (VIX, i.e., the ¡°fear index¡±) in fund discounts using a dynamic conditional correlation (DCC) approach. We find that VIX has almost no role in determining discounts except during periods of extreme market turbulence, providing strong but indirect evidence for the sentiment story.

Suggested Citation

  • Seth Anderson & T. Randolph Beard & Hyeongwoo Kim & Liliana Stern, 2012. "Fear and Closed-End Fund Discounts," Auburn Economics Working Paper Series auwp2012-07, Department of Economics, Auburn University.
  • Handle: RePEc:abn:wpaper:auwp2012-07
    as

    Download full text from publisher

    File URL: http://cla.auburn.edu/econwp/Archives/2012/2012-07.pdf
    Download Restriction: no

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lutz, Chandler, 2015. "The impact of conventional and unconventional monetary policy on investor sentiment," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 89-105.

    More about this item

    Keywords

    Closed-end fund; discount; investor sentiment; dynamic conditional correlation; multivariate GARCH;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:abn:wpaper:auwp2012-07. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hyeongwoo Kim). General contact details of provider: http://edirc.repec.org/data/deaubus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.