Fundamentals or Sentiment? : An Analysis of Swedish Holding Companies’ NAV Deviations

A persistent anomaly to the efficient market hypothesis has been the consistent “closed-end funds puzzle”. This puzzle centres around the fact that closed-end funds (CEFs) have been trading at prices that deviate from their net asset values (NAVs). Previous CEF literature has extensively examined this relationship and attempted to explain it with factors such as management fees, leverage, portfolio composition, and investor sentiment, without reaching a consensus. Despite structural similarities between CEFs and holding companies, research relating to the key drivers behind deviations from NAV in holding companies remain underexplored. Drawing on the insights from the CEF literature, this study assesses whether similar factors can explain NAV deviations for publicly listed Swedish holding companies. Using a deductive and quantitative approach, the study analyses panel data from 15 Swedish holding companies listed on NASDAQ Stockholm from the start of Q1 2017 to the end of Q1 2025. The dependent variable is the NAV deviation, calculated as the percentage difference between the holding company’s market price and its NAV. Independent variables include portfolio concentration, management expense ratios, dividend yield, unlisted holdings, trading volume, blockholder ownership, and a sentiment index derived from equity mutual fund flows. Fixed-effects regression models with robust standard errors are applied to account for firm-specific and temporal heterogeneity. The results show that fundamental factors—management expenses, portfolio concentration, trading volume, and size—have statistically significant explanatory power for NAV deviations. Investor sentiment, proxied by equity mutual fund flows, lack a significant relationship with NAV deviations, providing a counterargument to the branch of literature supporting this view. Covid-19 does, however, significantly affect NAV deviations, signalling that investor sentiment may be part of the explanation for the NAV deviations. These findings contribute to the broader literature by bridging CEF theory and holding company valuation, highlighting both rational and behavioural drivers of NAV deviations. The study offers practical implications for investors by identifying variables associated with persistent NAV discounts or premiums. It also provides insights for company management and policymakers regarding capital structure, transparency, and governance measures that may mitigate valuation anomalies.