Empirical Investigation on the Determinants of Closed-End country-fund returns

This study investigates country-fund pricing in the U.S. stock market, employing various U.S. and foreign market factors in a structural context using weekly data of 40 country funds. The evidence suggests that the U.S. and foreign stock market returns, the previous level of fund premiums (discounts), and the changes in foreign exchange rates play a significant role in determining country-fund prices. Also, we show that the risk factors, such as the conditional variances of the U.S. and foreign market returns and foreign exchange returns, have moderate power to explain the country-fund returns. Finally, empirical findings indicate that the Asian crisis has a significant impact on the relationship between country-fund returns and suggested explanatory factors.