Closed-End Fund Discounts and Expected Investment Performance

Posted: 6 Feb 2004

See all articles by Robert Ferguson

Robert Ferguson

Axiomatic Systems, Inc.

Dean Leistikow

Fordham University - Finance Area


This paper 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 (a) the relation between relative premium changes and investment performance following IPOs, (b) relative premium mean-reversion following management changes, and (c) 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, expected investment performance

JEL Classification: G12

Suggested Citation

Ferguson, Robert and Leistikow, Dean, Closed-End Fund Discounts and Expected Investment Performance. Financial Review, Vol. 39, No. 2, May 2004. Available at SSRN:

Robert Ferguson

Axiomatic Systems, Inc. ( email )

5151 Collins Avenue, Suite 552
Miami Beach, FL 33140
United States
305-866-7720 (Phone)

Dean Leistikow (Contact Author)

Fordham University - Finance Area ( email )

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

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