Forecasting the returns on UK investment trusts: a comparison

Laurence Copeland () and Ping Wang

The European Journal of Finance, 2000, vol. 6, issue 3, 298-310

Abstract: The well known fact that investment trusts (closed-end mutual funds in the USA) trade at a discount means that the return to an investor depends not only on the change in net asset value (NAV), but also on changes in the discount over the holding period. Using daily data, this paper models the relationship between UK investment trust prices and NAV's using cointegration methodology then shows that the forecasts based on the, error correction mechanism (ECM) compare poorly with those from vector autoregressions. And then incorporates a number of modifications to the ECM in an attempt to improve the forecasts. In particular, modelling volatility persistance and allow for asymmetric resonses in the ECM.

Keywords: Cointegrations Var Mutual Funds Net Asset Value Ecm Garch Asymmetry (search for similar items in EconPapers)
Date: 2000
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DOI: 10.1080/13518470050085111

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