The Mexican Crisis and the Behavior of Country-Fund Discounts: Renewing the Puzzle of Closed-End Fund Pricing

Charles Kramer () and Richard Smith
Additional contact information
Charles Kramer: Capital Markets and Financial Studies Division, Research Department, International Monetary Fund, Room IS 12-802, 700, 19th Street, Washington, DC 20431, USA

International Journal of Theoretical and Applied Finance (IJTAF), 1998, vol. 01, issue 01, 161-174

Abstract: Many studies have attempted to reconcile the behavior of closed-end fund prices with notions about the behavior of investors. Such studies have appealed to frictions (taxes, agency costs, and illiquidity) and investor sentiment to explain the puzzling behavior of fund prices. The events of December 1994 in Mexico, and subsequent effects on some funds' prices, have given rise to a new puzzle, extreme premia on closed-end funds that invest in Mexican stocks. We believe this new puzzle is not amenable to explanation by extant hypotheses. We offer a hypothesis of loss-aversion on the part of individual investors as a possible explanation, and outline the relevant effects that loss-aversion should have on fund discounts.

Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219024998000084
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijtafx:v:01:y:1998:i:01:n:s0219024998000084

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219024998000084

Access Statistics for this article

International Journal of Theoretical and Applied Finance (IJTAF) is currently edited by L P Hughston

More articles in International Journal of Theoretical and Applied Finance (IJTAF) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().