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Aalto University School of Business Master's Theses are now in the Aaltodoc publication archive (Aalto University institutional repository)
School of Business | Department of Finance | Finance | 2012
Thesis number: 12905
Scandinavian investor sentiment and net asset value discounts of closed-end investment companies
Author: Lahti, Niklas
Title: Scandinavian investor sentiment and net asset value discounts of closed-end investment companies
Year: 2012  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; sijoitukset; investments; sijoittajat; investors; pörssiyhtiöt; exchange-listed companies
Pages: 66
Key terms: rahoitus; financing; sijoittajasentimentti; investor sentiment; substanssialennus; net asset value discount; noteerattu sijoitusyhtiö; closed-end investment company

The purpose of this study is to investigate the effects of Swedish and Scandinavian investor sentiment on the net asset value discounts of closed-end investment companies. While previous studies have linked sentiment to discounts, both Scandinavian and Swedish evidence is lacking. The study contributes to existing literature by further developing the methodology by Baker & Wurgler (2006) to examine the investor sentiment effect brought forward by Lee et al. (1991) in a Scandinavian setting. In particular, this study offers additional evidence to Hjelström (2007) regarding the aggregate discounts of closed-end investment companies in Swedish capital markets. Unlike previous studies, I provide evidence on individual investment companies and consider both regional and local sentiment as an explanatory factor.


The investor sentiment data set covers quarterly data for stock mutual fund inflows, trading volume for aggregate equity markets, and the number and first-day returns of all main-list IPOs within the time period of 1.1.1999 to 31.3.2011 separately for Sweden, Finland, Denmark and Norway. The net asset value data set covers 854 quarter-end net asset value discounts (or premiums) of 20 closed-end investment companies during the same time period. Both of the novel datasets were manually collected from multiple sources.


My main findings indicate that the aggregate net asset value discount of closed-end investment companies is not a sentiment indicator. I show that investor sentiment does not affect aggregate discounts but rather affects the discounts of individual closed-end investment companies. Furthermore, sentiment affects the discounts of individual investment companies in conflicting ways (i.e. positive sentiment can either increase or decrease discounts). Finally, I find evidence indicating that discounts of individual investment companies do not exhibit correlation, and that the strength of the sentiment effect varies substantially between different types of individual investment companies. My results are mostly in contrast to Lee et al. (1991) but in line with Hjelström (2007).
Master's theses are stored at Learning Centre in Otaniemi.