Study Of Closed-end Fund Discount Phenomenon

The discount of closed-end fund means its price of market trade is lower than the net value of assets. It has been a very pondered-over problem in the financial field for a long time. The study of the phenomenon of closed-end fund devaluation is not only a theoretical study and interpretation of phenomenon, but also helps us to further understand security market and the behavior and mind of investors. The closed-end funds have been set up since 1998 in china, in order to cultivate a fire-new financing market actively and direct the public conception of investment reasonably. But after a short period of exchange at a premium, the fund is often below its net value.This paper first analysis the basic characteristics of closed-end fund devaluation in our country briefly. Then we discussed the explanations of this phenomenon with theoretic and empirical study from two aspects: the traditional economic factors, and investor sentiment.Ten factors are chosen to demonstrate the fund devaluation of our country. By way of multi-variable analysis, the essay finds that these factors can't give a satisfactory explanation to the devaluation.The further part introduces behavioral finance to study the devaluation. Three hypothesis are proposed and verified. The result shows that investor sentiment can explain the devaluation in the market.From the research, we make some suggestions both to the authority and the investors.