Abraham Mulugetta

The influence of standard and poor’s ranking changes on stock price performance

Describes Standard and Poor’s (S&P: USA) star ranking system for firm performance and presents a study of the impact of ranking changes on share prices. Outlines previous research on the effect of ranking changes and examines the share prices for 70 days before and after S&P ranking change announcements 1993‐1995 to assess abnormal returns. Explains the methodology and presents the results, which show significant changes in abnormal returns around the announcement dates, especially where the change is “in leaps rather than in steps”.

Risk and Income Effects on Closed-End Funds Using Derived CAPM Valuation Model

There have been many theories developed to explain the discount that existed for closed end funds. But few valuation models for closed end funds were ever developed. In this paper, a valuation model for closed-end fund is derived using the CAPM, which may be considered a breakthrough in the field of closed-end funds since a formula for estimating the theoretical value of the fund portfolio has been developed without a priori knowledge of its beta value, the need for making constant growth assumption, or resorting to regression analysis which is subject to statistical error. Based on this model, we calculate the expected return of the fund portfolio as implied by the actual discount (implied return) for 35 general closed end funds. We found that high discount corresponds with low implied return. More interestingly, high discount is found to correspond significantly with low expected net return, where expected net return is implied return in excess of expense ratio.

Subset of emerging equity markets performance in international equity markets at time of currency crises

This study examines the behaviors of eight Asian emerging market Single Country‐Closed End Funds’ (SCCEFs) market prices, net asset values (NAV) and price to net asset value ratios from January 5, 1996 to February 25, 2000, bracketing the period of the Asian currency crisis. The purpose of the study is to discern the degree of change of SCCEFs’ market prices and net asset values (NAV) in conjunction with changes in certain objective economic factors as explanatory variables, particularly changes in exchange rates, that may shed light on the probable reasons for the stickiness of market prices and yet speedy adjustment of NAVs. Results of statistical analysis suggest asymmetric information holding explanation to be the major reason for the observed phenomenon that can be exploited for profitable SCCEF investment decisions.