Prior Performance and Closed-End Fund Discounts

University of Nottingham Economics Discussion Paper No. 03/16

39 Pages Posted: 19 Dec 2003

See all articles by Michael Bleaney

Michael Bleaney

University of Nottingham - School of Economics

R. Todd Smith

University of Alberta

Date Written: September 2003

Abstract

In open-end funds, net inflows are positively correlated with past performance. This study investigates how past net asset value (NAV) returns affect the premium on closed-end funds traded in the United States and the United Kingdom. Past performance is significantly priced in stock funds, although NAV returns are persistent only for bond funds. In the United States, where realized capital gains are paid out as dividends, investors appear to interpret dividend flows as evidence of skill. There is substantial short-run inertia in fund prices, which tests indicate is explained to some extent by staleness of reported NAVs.

Keywords: closed-end fund, discount, return

JEL Classification: G12

Suggested Citation

Bleaney, Michael and Smith, Richard Todd, Prior Performance and Closed-End Fund Discounts (September 2003). University of Nottingham Economics Discussion Paper No. 03/16. Available at SSRN: https://ssrn.com/abstract=467880 or http://dx.doi.org/10.2139/ssrn.467880

Michael Bleaney (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom
+44 0 115 951 5265 (Phone)
+44 0 115 951 5141 (Fax)

Richard Todd Smith

University of Alberta ( email )

8-14 Tory Building
Edmonton, Alberta T6G 2H4
Canada
403-492-7898 (Phone)
403-492-3300 (Fax)

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