Premium To Net Asset Value

外汇网2021-06-19 13:40:20 196

A pricing situation that occurs when the stock value of a closed-end mutual fund is trading at a pmium to the net asset value (NAV) of its components. The pmium arises from the optimistic sentiment of investors toward the fund, which may be due to excellent management and investment strategies.

Only closed-end funds can trade at pmiums or discounts to their net asset values. Open-end mutual funds are not affected by supply and demand because they are purchased and sold at their current NAVs.

Because pmiums are fueled by investor opinions, popular funds with successful past performances will be favorably valued. Similarly, new closed-end funds can often begin trading at a pmium due to market optimism and hype. The pmium repsents the market's belief that the fund managers' continual ability to produce excess returns is a result of their superior market timing and stock selections.

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