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What Can “Nine‐Eleven” Tell Us about Closed‐end Fund Discounts and Investor Sentiment?
Author(s) -
Burch Timothy R.,
Emery Douglas R.,
Fuerst Michael E.
Publication year - 2003
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/1540-6288.00058
Subject(s) - extant taxon , closed end fund , mutual fund , event study , financial economics , asset (computer security) , monetary economics , economics , shock (circulatory) , event (particle physics) , capital market , business , finance , history , context (archaeology) , physics , computer security , evolutionary biology , market liquidity , computer science , medicine , biology , archaeology , quantum mechanics
We use the horrific events of September 11, 2001 (“nine‐eleven”) as a natural test of the hypothesis that closed‐end mutual fund discounts from fund net asset values reflect small investor sentiment. Because nine‐eleven was a sudden, unforeseen, and significantly negative and exogenous shock to the world, the capital markets, and investor sentiment, our test avoids many of the problems of extant studies. Discounts worsened dramatically following the event, and then recovered alongside the broader market. This finding is consistent with the hypothesis that discounts reflect the sentiment of small investors, who took their cues from the broader market's overall movement.