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Is Moderate Market Performance in the U.S. a Sufficient Condition for Abnormal Returns on CEFs?

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  • Christos Alexakis
  • Emmanouil Mavrakis

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. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • Christos Alexakis & Emmanouil Mavrakis, 2010. "Is Moderate Market Performance in the U.S. a Sufficient Condition for Abnormal Returns on CEFs?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(1), pages 80-95, February.
    • Handle: RePEc:kap:iaecre:v:16:y:2010:i:1:p:80-95:10.1007/s11294-009-9245-4
    DOI: 10.1007/s11294-009-9245-4
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    More about this item

    Keywords

    Closed-end fund discount; Cointegration; G10; G30;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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