Crises, Contagion, and the Closed-End Country Fund Puzzle

Eduardo Levy-Yeyati and Angel Ubide
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Eduardo Levy-Yeyati: International Monetary Fund
Authors registered in the RePEc Author Service: Eduardo Levy Yeyati

IMF Staff Papers, 2000, vol. 47, issue 1, 3

Abstract: This paper analyzes the behavior of closed-end country fund discounts, including evidence from the Mexican and East Asian crises. It finds that the ratio of fund prices to their fundamental value increases dramatically during a crisis, an anomaly that we denote the "closed-end country fund puzzle." Our results show that the puzzle relates directly to the fact that international investors are less (more) sensitive to changes in local (global) market conditions than domestic investors. This asymmetry implies that foreign participation in local markets can help dampen the effect of a crisis in asset prices in the originating country, at the cost of amplifying contagion to noncrisis countries. Copyright 2000, International Monetary Fund

JEL-codes: E3 G1 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Crises, Contagion, and the Closed: End Country Fund Puzzle (1998)
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