Risk, Managerial Skill and Closed-End Fund Discounts
AbstractEmpirical evidence from the UK market is brought to bear on recent theories of closed-end fund discounts. Market pricing of skill, relative to the fees charged for it, accounts for a significant portion of discount variation, but cannot explain the rarity of index funds or why they trade at a discount. Index funds have lower discount volatility. Discount risk is much more systematic on international than on domestic funds. It is argued that even idiosyncratic risk is priced in closed-end funds, because they are likely to represent a significant proportion of investors’ risky portfolios.
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Bibliographic InfoPaper provided by University of Nottingham, School of Economics in its series Discussion Papers with number 08/10.
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Closed-end fund; fund management; systematic risk;
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