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The Journal of Alternative Investments

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Primary Article

Closed–End Fund Discounts

A Rational Basis for Discounts

G. Glenn Baigent
The Journal of Alternative Investments Winter 1999, 2 (3) 45-50; DOI: https://doi.org/10.3905/jai.1999.318910
G. Glenn Baigent
An assistant professor of finance at Dalhousie University in Halifax, Nova Scotia.
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Abstract

The discounts on closed–end mutual funds may be partially attributed to Bayesian learning in a noisy rational expectations equilibrium. When the individual error is removed from private signals of informed agents, and random supply noise is absent, price is equated to its net asset (intrinsic) value; however, in the presence of imperfect information for “small investors,” price is biased downward. This model presents an alternative “rational” explanation for the existence of the closed–end fund discount.

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The Journal of Alternative Investments
Vol. 2, Issue 3
Winter 1999
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Closed–End Fund Discounts
G. Glenn Baigent
The Journal of Alternative Investments Dec 1999, 2 (3) 45-50; DOI: 10.3905/jai.1999.318910

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Closed–End Fund Discounts
G. Glenn Baigent
The Journal of Alternative Investments Dec 1999, 2 (3) 45-50; DOI: 10.3905/jai.1999.318910
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