Short-term persistence in emerging market closed-end funds performance and capital market segmentation
In the first chapter of this dissertation, using monthly data from January 1995 to December 2010 as a sample for emerging market closed-end funds (CEF), I demonstrate that a common factor in exists among stock returns, net asset value returns, and the difference in SP and NAV closed-end fund returns in emerging markets. Using a time series and a cross-section regression, furthermore, I find persistence in stock price returns, net asset value returns, but not in their differences in the short term. I demonstrate that these factors explain that fund managers' skills affect persistence. Additionally, I analyze market factors that explain the predictability of future CEF performances. The results provide support for CEF persistence in emerging markets, whereas CEF remains inconsistent with "hot hand" investment strategies. In the second chapter, I use monthly data from January, 1980 to May, 2009 for a sample of 35 closed-end funds that invest in emerging and developed markets. I find that discounts/premiums in emerging market and developed market forecast both share price (SP) and net asset value (NAV) returns, with the forecasting power of the latter being stronger. Additional tests show that the fund discounts/premiums contain information about future macroeconomic factors of their corresponding emerging and developed markets. I also document a strong association between investors' expectations of future macroeconomic conditions and the difference in SP and NAV returns. The results support a rational market segmentation explanation for the discounts/premiums in emerging market closed-end funds but they are not consistent with a straight forward investor sentiment explanation.