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- Title
THE ENIGMA OF CLOSED-END FUNDS PRICING: TWENTY-SIX YEARS LATER.
- Authors
Russel, Philip S.
- Abstract
Malkiel (1977) observed that market valuation of closed-end mutual funds is inconsistent with the efficient market hypothesis that spawned a stream of research articles. We review the important empirical results and explanations that have been advanced for the anomalous pricing of closed-end funds over the last 26 years. The extant evidence suggests that closed-end funds are issued at a premium with respect to their net asset values, but thereafter they typically trade at a discount--discounts that fluctuate widely over time. Some of the popular theories advanced to explain the anomalous pricing behavior include potential tax liability from unrealized capital gains, agency costs, illiquid holdings, management performance, and investor sentiment. We conclude that none of the theories, neither individually nor collectively, provides a sufficient explanation for the pricing of closed-end funds. Thus, the enigma continues.
- Publication
International Journal of Finance, 2004, Vol 16, Issue 2, p2985
- ISSN
1041-2743
- Publication type
Academic Journal