Managerial Skill and Closed-End Fund Discounts
Financial Markets and Portfolio Management, Vol. 24, No. 4, pp. 441-451, 2010
Posted: 20 Dec 2010
Date Written: October 8, 2010
Empirical evidence from the UK market is examined in the light of recent theories about closed-end fund discounts. Market pricing of skill, relative to the fees charged for it, accounts for a significant portion of discount variation, but cannot explain the rarity of index funds or why they trade at a discount, since fees tend to be lower than on open-end funds. Index funds have lower discount volatility, consistent with the skill hypothesis. The results imply that managerial skill, relative to the fees charged, does not wholly account for the tendency of closed-end funds to trade at a discount.
Keywords: Closed-end fund, Fund management, Management fees
JEL Classification: F30, G12
Suggested Citation: Suggested Citation