China Closed-end Fund Discounts Study

The discount of closed-end fund means its price of market trade is lower than the net value of assets. It has been a problem hard to solve in the financial field for a long time, which is called "Puzzle of the closed-end fund discount". The discount of closed-end fund violates the financial theory and challenges "the Efficient Market Hypothesis", but there is no improved and convinced theory to explain it.The paper briefly introduces the history of the closed-end fund in our country, and then, describes the characteristics of the discount of closed-end fund phenomenon in China. We discusses the explanations of the discount of closed-end fund phenomenon in China's stock market with both theoretic and empirical study from six aspects: the investor sentiment, market factors, bonus factors, fund achievements, asset liquidity of fund and the holding proportion of the insurance company. In the course of analysis, we use the viewpoints from both traditional finance and behavioral finance. The conclusion is, the investor sentiment, market factors and the holding proportion of the insurance company distinctly influence the discount of the fund, and they are positively relevant. Fund achievements and bonus factors are negatively relevant to the discount, but asset liquidity of fund is not correlated with the discount.Finally, according to the conclusion and the characteristics of the discount of closed-end fund phenomenon in our country, we give several advices to decrease the discount level.