Cover IMF Working Papers
Crises, Contagion, and the Closed: End Country Fund Puzzle
Author: Mr. Eduardo Levy Yeyati and Mr. Angel J. Ubide
Series:
IMF Working Papers
Volume/Issue:
Volume 1998: Issue 143
Language:
English
Publication Date:
01 Sep 1998
DOI:
https://doi.org/10.5089/9781451856316.001
ISBN:
9781451856316
ISSN:
1018-5941
Pages:
54
Keywords:
WP; exchange rate; financial crisis; share price; country funds; market index; Contagion; fund price; fund discount; closed-end country fund puzzle; growth fund; behavior of country fund prices vis-a-vis; fund market; discount variability; fund price index; country fund puzzle; country fund prices vis-a-vis; Stock markets; Emerging and frontier financial markets; Asset prices; Stocks; Asia and Pacific; Africa; Europe; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (1.6 MB) Download Epub
This paper analyzes the behavior of closed-end country fund discounts, including evidence from the Mexican and East Asian crises. We find that the ratio of fund prices to their fundamental value increases dramatically during a crisis, an anomaly that we denote the “closed-end country fund puzzle.” Our results show that the puzzle relates directly to the fact that international investors are less (more) sensitive to changes in local (global) market conditions than domestic investors. This asymmetry implies that foreign participation in local markets can both help dampen a crisis in the originating country, and amplify the contagion to noncrisis countries.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund