An Empirical Study Of China's Closed - End Fund Discount Information

Unlike opened-fund, the value of closed-fund has it's unusual double desiding system like other assetmarket pricing system desided by provision-demand relation, and at the same time the net asset value system from the accouting angle. So this has made the difference between the price and value of closed-fund. If the price is higher than the nav(net asset value), this fact is called primium, contrarily, this is called discount. And closed-fund has always show the fact of disount. The problem of discount of closed-fund has long been the misery in the theroy. Alough many researcher have paid much on the research, and their research were built on differert bases and from different angle, there's no one theory can make the perfect explanation for the misery.Among so many discount theories, performance expectation theory abstain that, the discount shows the expectation of closed-fund future performance on nav, and the discount range is nagatively correlative with the performance of fund. On the other side, the theory of investor sentiment abstain that the price variation of closed-fund show the sentiment variation of irrational noise investor, and this kind of sentiment bring the investors additional risk, so the discount have to give compensation for the additional risk.For the purpose of prove the two discount theory, this article use two earning rate data: future accumulating fund earning rate and future accumlating fund nav earning rate. Through the respective regression of the two data by the discount of closed-fund, we can see the the discount's ability of prediction on the two data.Futher, this can tell us the imformation content of closed-fund discount on the fund market price and fund nav aspects.By the comparation between the significance of two regression programme coefficient, this aritical make the conclusion: the discount of Chinese closed-fund has relatively strong ability of prediction on future fund earning rate, but relatively weak ability of prediction on future fund nav earning rate. That is to say, the discount of closed-fund has conluded the information on fund market price , but no information on fund nav. And then this article use real data to give the discount's pridiction abilitity on future accumulating fund earning rate a try of provation. In the end, this conclusion of the empirical study has provided strong support for the theory of investor sentiment, and at the same time showed that the theory of expectation of fund performance is so suitable for the explanation of closed-fund discount misery.