Open AccessThe Premium/Discount Of Closed-End Funds As A Measure Of Investor Sentiment: Evidence From Greece
Author(s) -
Dimitrios Kousenidis,
Dimitrios I. Maditinos,
Željko Šević
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v27i4.4655
Subject(s) - proxy (statistics) , explanatory power , capital asset pricing model , portfolio , economics , predictive power , econometrics , stochastic discount factor , risk premium , market capitalization , financial economics , market portfolio , value premium , context (archaeology) , monetary economics , stock market , mathematics , paleontology , philosophy , statistics , epistemology , biology
We examine the proposition that the premium/discount (PD) of Greek closed-end funds (CEFs) is an accurate proxy for the small-investor sentiment risk. We find that the average PD explains the returns of portfolios of large capitalization and low book-to-market ratio stocks. In this context, we are unable to confirm a link between the perceived PD anomaly and the small size effect. Moreover, we show that the explanatory power of the PD for portfolio returns depends on the form of the asset pricing model used in the regression analysis. Finally, in terms of predictive ability, we find evidence that the PD predicts the size and the book-to-market premiums but little evidence that the PD predicts individual portfolio returns.