The Study Of Chinese Closed-end Fund Discount Puzzle

The closed-end fund discount puzzle, which means fund’s secondary market business price is lower than its unit net value, has been a popular issue in most countries’ securities market, and become a hot spot problem for academic world. Compared to western countries, the discount of closed-end fund in China’s security market is even serious, and the closed-end fund present situation in our country does not admit hoping for the best. Therefore in-depth study of the reason of this phenomenon and puts forward a proposal for our country’s closed-end fund has an important theoretical and practical significance to the healthy development of the closed-end fund.In this paper, firstly we sort out the relevant theoretical and empirical papers in domestic and abroad, comparing the advantages and disadvantages of various theories. Then we use the option thoughts to explain The closed-end fund discount puzzle. In this paper, we choose all the data of all 28 existing closed-end fund of our market since them issued. And use Monte Carlo Simulation to price the call-option and put-option. And then give a new operating mode of our country’s closed-end fund as a suggestion.The results of the empirical studies on the discount of closed-end fund in China show that:Firstly, the phenomenon can be explained pretty well by the value of the options which are broken down from the closed-end fund; secondly the bonus of closed-end fund has nothing to do with the discount.