Abstract
In this project, our topic pertains to examination of market efficiency, employing data from closed-end funds (CEFs) trading in the American stock market. Employing both aggregate and individual data, we examine whether or not moderate market performance is a sufficient condition in order to achieve abnormal returns, in the short-run, through exploitation of discount deviations from its mean value. The main hypothesis tested is that market performance affects the mean-reverting properties of CEFs’ discount. Moderate market performance ensures the mean-reversion of CEFs’ discount and points to cointegration between the share prices of CEFs and their net asset value (NAV). Furthermore, when NAV is identified as the common stochastic trend of the system then, market inefficiency is detected.
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Notes
Considering model specification, tables with lag length determination tests along with descriptive statistics and univariate normality tests for the residuals are available upon request.
In Table 6, considering results on CEFs numbered as 35 and 79, trace test indicates r = 1, however, due to residuals’ normality problems, we choose to accept r = 0. Examining, individual data, in order to secure robust results on cointegration rank and hypotheses tested, we have performed tests considering multivariate stationarity, univariate normality and variable exclusion. Tables reporting values on those tests are available upon request.
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Alexakis, C., Mavrakis, E. Is Moderate Market Performance in the U.S. a Sufficient Condition for Abnormal Returns on CEFs?. Int Adv Econ Res 16, 80–95 (2010). https://doi.org/10.1007/s11294-009-9245-4
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DOI: https://doi.org/10.1007/s11294-009-9245-4