| Summary: | 碩士 === 國立清華大學 === 科技管理研究所 === 96 === Abstract
Closed-end mutual fund puzzle is an interesting and funny problem. It is not a problem that the net value is not equal to its market price, but the complicated investors’ sentiment. And, closed-end mutual fund puzzle can prove that the investors do their judgment by emotion. According to Lee,Shleifer, Thaler(1991), summarized four important pieces to the puzzle which together
Characterize the life cycle of a closed-end fund
1. Closed-end funds start out at a premium of almost 10 percent. It likes the equity that have honey moon.
2. After start out to the market, the premium turns into discount only in few weeks. Sometime, the degree of price changed more than 30%.
3. The discount will hold in the long run.
4. When closed-end funds are terminated through either liquidation or an open-ending, shares prices rise and discounts disappear.
The reasons to explain the puzzle include two parts, one part, the traditional reason, like agency cost and unrealized capital gain, and investors’ sentiment reason in behavior finance. But, this reason can’t explain the whole procession of the puzzle nowadays.
In our research, we use data in China equity market from Jan 2000 to Dec 2006. To discuss the size and dividend payouts rate their effect. We also test the herd behavior to affect the degree of the discount. We find that the size, the dividend pay out rate, and the performance are the main reasons to explain discount in China equity market. We also find that if investors have to face the uncertainty, they will be prone to buy the equity according to herd behavior. And, they will ask more discount. Under this circumstance, we can say that noise traders and his emotional reaction are the main reasons to cause the discount.
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