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- Title
Bid-Ask Spreads, Information Asymmetry, and Abnormal Investor Sentiment: Evidence from Closed-End Funds.
- Authors
Jeng-Hong Chen, Andrew; Christine X. Jiang, Andrew; Jang-Chul Kim, Andrew; McIntish, Thomas H.
- Abstract
Using a sample of closed-end funds listed on the New York Stock Exchange (NYSE) from 1994 to 1999, this article investigate the differences of the spreads and the adverse selection costs between the closed-end funds and a matched sample of common stocks. It has been found that the spreads and adverse selection costs for the closed-end funds are significantly lower than those of a matched sample of common stocks listed on the NYSE. In addition, the change of minimum tick size on NYSE on June 24, 1997 lowers the spreads and increases adverse selection costs, yet the spreads and adverse selection costs of closed-end funds are consistently lower than those of control stocks both before and after tick size change. Finally and most importantly, it has been found that adverse selection costs on closed-end funds vary considerably over time, and abnormal investor sentiment can help to explain the variation in adverse selection costs. This study shows that there is a positive relationship between abnormal investor sentiment and the adverse selection costs even after other determinants of information asymmetry are properly controlled.
- Subjects
CLOSED-end funds; SPREAD (Finance); BID price; NEW York Stock Exchange; STOCKS (Finance); ASKED price
- Publication
Review of Quantitative Finance & Accounting, 2003, Vol 21, Issue 4, p303
- ISSN
0924-865X
- Publication type
Article
- DOI
10.1023/B:REQU.0000004781.54733.67