# Canadian Investors and the Discount on Closed-End Funds

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## Abstract

We explore the role of the discount on closed-end funds (CEFD) in asset pricing and test its validity as a proxy for investor sentiment in the Canadian stock market. Results show that CEFD is not a priced factor. Both cross-sectional and time-series tests confirm that stocks with different exposures to CEFD do not have significantly different average returns. CEFD does not even provide incremental explanatory power after controlling for firm characteristics and risk factors. Furthermore, CEFD fails to be a proxy for investor sentiment with no correlation to either the consumer confidence index or flows to open-ended funds.

## Keywords

Closed-end funds Investor sentiment Cross-sectional regressions## JEL classification

G11 G12 G15## References

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