The Closed-End Investment Company Premium Puzzle
Doctoral treatment of the discount anomaly; narrow but the real literature.
Summary
The reference has not verified this book in detail; the summary states only what the title, author and subject establish.
Tomas Hjelstrom examines the pricing of closed-end investment companies relative to the value of the assets they hold. The standard puzzle is the persistent discount at which most such funds trade, which is difficult to reconcile with efficient pricing since the underlying assets are themselves marked at market. This work addresses the less-studied case where funds trade at premiums.
The reference has not verified this book's contents in detail. It appears to be an academic monograph, likely developed from doctoral research at a Swedish institution, examining the pricing of investment companies in a European context. The subject is established by the title; this entry does not assert more about the specific findings or method.
Readers interested in the general closed-end fund discount and premium literature should note that the standard explanations include management fees and expected future fees, the tax treatment of unrealised gains, agency costs, illiquidity of underlying holdings, and investor sentiment, and that no single explanation accounts for the full pattern.
Key takeaways 5
- Closed-end investment companies trade at prices that differ persistently from the value of the assets they hold.
- Discounts are the common case and premiums are the anomaly requiring explanation.
- Standard explanations for the discount include management fees, deferred tax on unrealised gains, agency costs and illiquidity of holdings.
- No single explanation accounts for the full observed pattern of discounts and premiums across funds and over time.
- The persistence of these deviations is difficult to reconcile with efficient pricing, since the underlying assets are separately marked.
Who should read it
Researchers on closed-end fund pricing, with the caveat that this entry describes the general literature rather than a verified reading of this work.
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Where it sits in the reference 1
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