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Past Returns and Investment Trust Discounts

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  • Michael Bleaney

Abstract

The relationship between past net asset value returns and the current discount on investment trusts is investigated. The relationship is weaker for the component that is common to all trusts in the same sector, and is significantly stronger for more liquid trusts. The time lag before returns have their full impact on discounts is consistent with the requirements of distinguishing ‘skill’ from noise. Although discounts vary widely even within the same sector, the range of variation appears to be consistent with an arbitrage equilibrium, in which the profits of exploiting apparent pricing anomalies are just insufficient to invite arbitrage trades.

Suggested Citation

  • Michael Bleaney, 2004. "Past Returns and Investment Trust Discounts," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(9‐10), pages 1505-1523, November.
    • Handle: RePEc:bla:jbfnac:v:31:y:2004:i:9-10:p:1505-1523
    DOI: 10.1111/j.0306-686X.2004.00582.x
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    Cited by:

    1. Laurence Copeland, 2007. "Arbitrage Bounds and the Time Series Properties of the Discount on UK Closed‐End Mutual Funds," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(1‐2), pages 313-330, January.

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