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Mean-reversion in closed-end fund discount: evidence from half-life

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  • Philip Inyeob Ji
  • Sangbae Kim

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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  • Philip Inyeob Ji & Sangbae Kim, 2013. "Mean-reversion in closed-end fund discount: evidence from half-life," Applied Economics, Taylor & Francis Journals, vol. 45(32), pages 4503-4515, November.
    • Handle: RePEc:taf:applec:v:45:y:2013:i:32:p:4503-4515
    DOI: 10.1080/00036846.2013.791019
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