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Do closed-end fund investors herd?

Yueting Cui, Bartosz Gebka () and Vasileios Kallinterakis

Journal of Banking & Finance, 2019, vol. 105, issue C, 194-206

Abstract: We provide the first investigation of herding among closed-end fund investors, drawing on the US closed-end fund market for the 1992–2016 period. Results suggest closed-end fund investors herd significantly, with their herding being mainly driven by non-fundamentals. Closed-end fund herding rises in economic/market uncertainty, with its significance being mainly concentrated in the post-2007 period. Herding among closed-end funds is strongly motivated by discounts, is more pronounced than that among their net asset values and tends to grow inversely with fund-size. The fact that closed-end fund herding is noise-driven and linked to their discounts raises the possibility that it is related to the noise trader risk attributed to closed-end funds by investor sentiment theory.

Keywords: Closed-end funds; Herding; Discounts; Sentiment (search for similar items in EconPapers)
JEL-codes: G23 G4 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:jbfina:v:105:y:2019:i:c:p:194-206