EconPapers    
Economics at your fingertips  
 

The Short-Run Pricing Behavior of Closed-End Funds: Bond vs. Equity Funds

Seth Anderson, Thomas Beard, Hyeongwoo Kim () and Liliana Stern

No auwp2014-14, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: This paper investigates the short-run relationship between closed-end fund prices and their net asset values. In particular, we document three systematic differences between the short-run pricing behaviors for stock and bonds funds. For equity funds, we show that returns processes for both prices and asset values have characteristics of a random walk, while bond funds returns are more predictable. Similarly, multivariate GARCH analysis establishes the existence of stronger news and volatility spillover effects between the fund price and the net asset value for bond funds than for stock funds. Finally, we find significantly weaker dynamic conditional correlations between the fund price and its fundamental value for bond funds after the Lehman Brothers failure, whereas no such evidence is found for stock funds. To explain these findings, we propose a mechanism based on bond market illiquidity.

Keywords: Closed-End Funds; Market Efficiency; Market Illiquidity; Common Factors; Dynamic Conditional Correlation (search for similar items in EconPapers)
JEL-codes: C32 G01 G12 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://cla.auburn.edu/econwp/Archives/2014/2014-14.pdf (application/pdf)

Related works:
Journal Article: The Short-Run Pricing Behavior of Closed-End Funds: Bond vs. Equity Funds (2016) Downloads
Working Paper: The Short-Run Pricing Behavior of Closed-End Funds: Bond vs. Equity Funds (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:abn:wpaper:auwp2014-14

Access Statistics for this paper

More papers in Auburn Economics Working Paper Series from Department of Economics, Auburn University Contact information at EDIRC.
Bibliographic data for series maintained by Hyeongwoo Kim ().

 
Page updated 2022-10-07
Handle: RePEc:abn:wpaper:auwp2014-14