Closed-End Fund Discounts and Expected Investment Performance

The Financial Review, 39 (2004) 179-202

25 Pages Posted: 7 Oct 2013

See all articles by Robert Ferguson

Robert Ferguson

AnswersToGo

Dean Leistikow

Fordham University - Finance Area

Date Written: 2004

Abstract

This article provides empirical support for the theory that closed-end fund discounts reflect expected investment performance. Evidence is presented to explain how equity closed-end fund initial public offerings (IPOs) can sell at a premium when existing funds sell at a discount and why the initial IPO premiums decay after the IPO. Relative premium decay data are presented. Tests on (1) the relation between relative premium changes and investment performance following IPOs, (2) relative premium mean-reversion following management changes, and (3) net redemptions following closed-end fund open-endings for funds trading at pre-open-ending announcement discounts individually support and collectively strongly support the theory.

Keywords: closed end fund discounts, performance

JEL Classification: G10, G11, G12, G13

Suggested Citation

Ferguson, Robert and Leistikow, Dean, Closed-End Fund Discounts and Expected Investment Performance (2004). The Financial Review, 39 (2004) 179-202. Available at SSRN: https://ssrn.com/abstract=2336721

Robert Ferguson (Contact Author)

AnswersToGo ( email )

6815 Edgewater Drve
Apt 208
Coral Gables, FL FL 33133
United States
7868974573 (Phone)

Dean Leistikow

Fordham University - Finance Area ( email )

33 West 60th Street
New York, NY 10023
United States

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