Re: Closed - End Fund Puzzle

[ROSSERJB@xxxxxxxxxxxxxxxx id <01HVQMVJ52CWHU1C0U@xxxxxxxxxxxxxxxx> for pkt@xxxxxxxxxxxxxxxx; Tue, 26 Sep 1995 17:30:59 -0500 (EST)]

To Paul Davidson,
     Going over quota, but
1)  I never said anything about postage stamps or PPP in my
post on closed-end funds and I shall not.  They are irrelevant.
2)  I never said the fundamental includes "speculation about
speculation."  Quite the contrary.  The fundamental should be
the net asset value plus or minus any agency costs or tax effects.
That's it.  All the stuff you talked about _is_ speculation and
we know it is because it generates these deviations.  Indeed many
observers use the overall level and direction of these deviations
(premia or discounts) as indicators of general "investor psychology."
     A few references:
Graham, Benjamin, _The Intelligent Investor: A Book of Practical
Counsel_, 1949, New York: Harper and Brothers.

Roenfeldt, Rodney L. and Donald L. Tuttle, "An Examination of the
Discounts and Premiums in Closed-end Investment Companies," _Journal
of Business Research_, 1973, 1, 129-140.

Zweig, Martin, "An Investor Expectations Stock Price Predictive Model
Using Closed-end Fund Premiums," _Journal of Finance_, 1973, 28, 67-87.

Malkiel, Burton G., "The Valuation of Closed-end Investment Company
Shares," _Journal of Finance_, 1977, 32, 847-859.

Lee, Charles M.C., Andrei Shleifer, and Richard H. Thaler, "Closed-End
Mutual Funds," _Journal of Economic Perspectives_, 1990, 4, 153-164.

Rappoport, Peter and Eugene N. White, "Was There a Bubble in the 1929
Stock Market?" _Journal of Economic History_, 1993, 53, 549-574.

     The most recent issue of _Journal of Financial Economics_ has a paper
by Jeffrey Pontiff, the title of which I don't have on me which shows that
you can beat the market buying deeply discounted closed-end funds.
Barkley Rosser