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Closed-End Fund Betas

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  • Michael Bleaney
  • R. Todd Smith

Abstract

The CAPM can explain closed-end fund (CEF) discounts as a consequence of the higher betas on CEF shares than on their underlying portfolios. The difference in betas is much greater for international funds and for bond funds than for domestic equity funds. CEF shares carry both more idiosyncratic risk (usually) and more systematic risk than their portfolios, and also exhibit excess volatility. The difference in betas reflects the sensitivity of CEF price returns to market returns, after controlling for portfolio returns. The influence of home market returns on international fund prices is particularly marked in UK funds.

Suggested Citation

  • Michael Bleaney & R. Todd Smith, 2006. "Closed-End Fund Betas," Discussion Papers 06/04, University of Nottingham, School of Economics.
    • Handle: RePEc:not:notecp:06/04
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    File URL: https://www.nottingham.ac.uk/economics/documents/discussion-papers/06-04.pdf
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    References listed on IDEAS

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    1. Heuristics vs expertise
      by chris dillow in Stumbling and Mumbling on 2006-07-11 19:09:04

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    Cited by:

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    2. Lahr, Henry & Kaserer, Christoph, 2009. "Net asset value discounts in listed private equity funds," CEFS Working Paper Series 2009-12, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).

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