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Canadian Investors and the Discount on Closed-End Funds

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  • Mohamed Ayadi
  • Hatem Ben-Ameur
  • Skander Lazrak
  • Yue Wang

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. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Mohamed Ayadi & Hatem Ben-Ameur & Skander Lazrak & Yue Wang, 2013. "Canadian Investors and the Discount on Closed-End Funds," Journal of Financial Services Research, Springer;Western Finance Association, vol. 43(1), pages 69-98, February.
    • Handle: RePEc:kap:jfsres:v:43:y:2013:i:1:p:69-98
    DOI: 10.1007/s10693-011-0125-8
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    More about this item

    Keywords

    Closed-end funds; Investor sentiment; Cross-sectional regressions; G11; G12; G15;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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