Short sale restrictions, differences of opinion, and single-country, closed-end fund discount

Lee W. Sanning, Alexandre Skiba and Hilla Skiba

International Review of Financial Analysis, 2013, vol. 29, issue C, 44-50

Abstract: The purpose of this paper is to study the closed-end fund discount in Miller's (1977) framework. Miller's theory states that in the simultaneous presence of (1) short sale restrictions and (2) dispersion of investors' opinions, securities become overvalued. We show that discounts of single-country, closed-end funds are related to Miller's two conditions. Consistent with theoretical predictions, we find that neither dispersion of investor opinion nor short sale restrictions alone are positively related to the discount. However, when both conditions exist simultaneously, fund discounts increase.

Keywords: Short sale restrictions; Closed-end fund discount; Investor disagreement (search for similar items in EconPapers)
JEL-codes: G14 G19 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:29:y:2013:i:c:p:44-50

DOI: 10.1016/j.irfa.2013.03.013

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