The effect of country-specific index trading on closed-end country funds

an empirical analysis

Authors

  • Matthew O’Connor Quinnipiac University, 275 Mount Carmel Avenue, Hamden, CT 06518
  • Edward A. Downe University of New Haven, 300 Orange Avenue, West Haven, CT 16516

DOI:

https://doi.org/10.1016/S1057-0810(01)00067-1

Keywords:

International financial markets, Market efficiency, Investments

Abstract

The American Stock Exchange initiated trading in 17 World Equity Benchmark Shares (acronym “WEBS”TM) in April 1996. WEBS are index funds designed to track the Morgan Stanley Capital International (MSCI) indexes. We examine the effect of this event on closed-end country funds (CECFs) and find that percentage discounts increase. CECFs with a corresponding WEBS index experience the largest increase and also show a decline in trading volume. We attribute these results to (1) the effects of increased competition and (2) a reduction in the market segmentation premium. Since additional WEBS have begun trading, and other approvals may follow, similar effects could be experienced in the future. © 2001 Elsevier Science Inc. All rights reserved.

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Published

2000-09-30

How to Cite

O’Connor, M., & Downe, E. A. (2000). The effect of country-specific index trading on closed-end country funds: an empirical analysis. Financial Services Review, 9(3), 259–275. https://doi.org/10.1016/S1057-0810(01)00067-1

Issue

Vol. 9 No. 3 (2000): Financial Services Review

Section

New Original Submission

License

Copyright (c) 2000 Elsevier Science Inc.

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