Classical economics: All actors are rational and stocks are efficiently priced. Behavioral economics, per Nobelist Richard Thaler: Investors’ decisions are warped by emotion and ignorance and prices can get out of line.

Count Erik M. Herzfeld, a money manager specializing in closed-end funds, in the Thaler camp. He aims to buy when fund shares trade at an irrationally low percentage of liquidating value and sell at a high percentage. Unlike mutual and exchange-traded funds, closed-ends don’t do redemptions, and their prices are a matter of investor whim.

“Big discounts and big premiums. It’s behavioral,” Herzfeld says. “No one reads prospectuses.” Or rather, he reads and retail investors don’t.

Read the full story on Forbes: https://www.forbes.com/sites/baldwin/2023/10/02/confessions-of-a-closed-end-fund-bargain-hunter/?sh=22f26a6c1111

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