Is Moderate Market Performance in the U.S. a Sufficient Condition for Abnormal Returns on CEFs?

Christos Alexakis and Emmanouil Mavrakis

International Advances in Economic Research, 2010, vol. 16, issue 1, 80-95

Abstract: In this project, our topic pertains to examination of market efficiency, employing data from closed-end funds (CEFs) trading in the American stock market. Employing both aggregate and individual data, we examine whether or not moderate market performance is a sufficient condition in order to achieve abnormal returns, in the short-run, through exploitation of discount deviations from its mean value. The main hypothesis tested is that market performance affects the mean-reverting properties of CEFs’ discount. Moderate market performance ensures the mean-reversion of CEFs’ discount and points to cointegration between the share prices of CEFs and their net asset value (NAV). Furthermore, when NAV is identified as the common stochastic trend of the system then, market inefficiency is detected. Copyright International Atlantic Economic Society 2010

Keywords: Closed-end fund discount; Cointegration; G10; G30 (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1007/s11294-009-9245-4

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