Mean-reversion in closed-end fund discount: evidence from half-life

2013/07/16 by Philip Inyeob Ji, Sangbae Kim
Economics, Econometrics and Finance · Business, Management and Accounting · #Financial Markets and Investment Strategies #Housing Market and Economics #Financial Literacy, Pension, Retirement Analysis

paper · doi:10.1080/00036846.2013.791019

Abstract

This article examines the mean-reversion properties of the discount on UK and US closed-end funds. While the discounts are tested I(1), strong statistical evidence of mean-reversion is ascertained by bias-corrected bootstrap half-life estimates. The estimates also indicate that equity-based funds converge to the steady-state level faster than fixed income funds. In addition, although an equilibrium pricing condition postulates an inverse relation between half-life and the discount size, correlation estimates fail to show strong support for the relation.

Citations

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