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Market Segmentation, Liquidity Spillover, And Closed-End Country Fund Discounts, Sai Pang (Justin) Chan, Ravi Jain, Yihong Xia
Market Segmentation, Liquidity Spillover, And Closed-End Country Fund Discounts, Sai Pang (Justin) Chan, Ravi Jain, Yihong Xia
Research Collection Lee Kong Chian School Of Business
In a segmented international capital market, the illiquidity of a country fund in the market in which its shares are traded affects only the share price of the fund (S), while the illiquidity of its underlying assets in the market in which these are traded affects only the fund net asset value (NAV). In an integrated market, illiquidity in one market can easily spill over to another and affect both the fund share price and its underlying asset value. It follows that the closed-end country fund premium, P[reverse not equivalent]ln(S)-ln(NAV), is negatively (positively) affected by the fund (underlying asset) illiquidity …