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.
| Original language | English |
|---|---|
| Pages (from-to) | 4503-4515 |
| Number of pages | 13 |
| Journal | Applied Economics |
| Volume | 45 |
| Issue number | 32 |
| DOIs | |
| State | Published - 2013 |
Keywords
- Closed-end funds discount
- Half-life
- High-density region
- Mean-reversion