The Closed-End Investment Company NAV Deviation Puzzle: What does the Industry Reveal?

Abstract: This study of net asset value deviations ("NAV deviations") is conducted with a qualitative method to find explanations for NAV deviations by testing the entrenchment of current theories in Swedish investment companies. The study was conducted through a total of 15 interviews with representatives from investment companies, equity research analysts and fund managers. The empirical findings show that premiums are mostly explained by technicalities such as the size of the free float and liquidity in the share, whereas discounts are mostly explained by the perceived agendas and the capabilities of the management, information asymmetries and portfolio structure. These results are in comparison to observed previous studies partially inconsistent and one explanation for this is that emphasis has to be put on company specific factors, rather than NAV deviations as a generic phenomenon.