Mean-reversion in closed-end fund discount: evidence from half-life |
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| Authors: | Philip Inyeob Ji Sangbae Kim |
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| Institution: | 1. Department of Accounting and Finance, Monash University, Clayton, Australiaphilip.ji@buseco.monash.edu.au;3. School of Business Administration, Kyungpook National University, Daegu, Republic of Korea |
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| 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. |
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| Keywords: | closed-end funds discount mean-reversion half-life high-density region |
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