Further Evidence on Closed-End Country Fund Prices and International Capital Flows

The Journal of Business 07/2006; 79(4):1727-1754. DOI: 10.2139/ssrn.559022
Source: RePEc


Using cointegration analysis I establish a long-run relationship between country fund premiums and international capital flows in six out of 10 emerging markets and in two out of seven developed markets examined. This relationship is explored to derive an intuitive measure of capital market segmentation that accounts for investment barriers and does not rely on a specific asset pricing model. I find that most emerging markets are segmented, but some exhibit a clear trend toward integration, whereas most developed countries exhibit no evidence of segmentation. The segmentation measure reveals that the process toward integration is gradual and can be reversed.

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    ABSTRACT: Closed-end funds have been a topic of lively debate for several decades. In this paper I focus on studies relating to liquidity, sentiment and segmentation and, in particular, on studies that investigate closedend country funds. I extend the previous survey by Dimson & Minio- Kozerski (1999) by adding in more recent contributions to the closedend fund debate; and by including more of a discussion of sentiment, segmentation and country funds I complement the recent survey by Cherkes (2012). In addition I provide summaries of over 40 key papers in these areas, listing the sample and sample period, the theory examined and the findings of each paper.