Who's the Fairest of Them All? Evidence from Closed-End Funds
49 Pages Posted: 26 Sep 2013 Last revised: 24 Mar 2016
Date Written: April 1, 2015
Prior research examining the ASC 820 fair value hierarchy concludes that Level 3 fair value measurements are significantly less value relevant than Level 1 and Level 2 fair value measurements. We reevaluate this conclusion using the closed-end fund setting, in which fair value measurements are available for substantially all assets. Contrary to prior research, we find that Level 3 fair values are of similar value relevance to Level 1 and Level 2 fair values. Our findings suggest that the results in previous research are attributable to correlated omitted variable bias arising from the absence of fair value data for most assets.
Keywords: ASC 820, fair value measurement, Level 1, Level 2, Level 3, value relevance, timeliness, closed-end mutual funds
JEL Classification: M41, G12, G29
Suggested Citation: Suggested Citation