Karan Bhanot (University of Texas at San Antonio) Valeria Martinez (Fairfield University) Lalatendu Misra (University of Texas at San Antonio) Jullavut Kittiakaraskun (University of North Carolina, Pembroke) Sinan Yildirim (University of Texas at San Antonio)
Abstract
Based on an extensive sample of U.S. closed-end funds undergoing open-ending conversion, we examine the behavior of discounts prior to the announcement till the date of open-ending. Discounts are significantly reduced upon announcement of open-ending with price increase. Announcement period return is directly related to the pre-announcement discount, liquidity, and other characteristics of the fund. We decompose the pre-announcement discount into structural and diosyncratic parts, and report that there is a greater reduction of the idiosyncratcic part of the discount. We examine the role of distributions to the investors on the size and behavior of discounts subsequent to the open-ending announcement. We find that small amounts of discounts remain at the time of the open-ending and investigate potential explanations for such discounts.
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Publisher Info
Paper provided by College of Business, University of Texas at San Antonio in its series Working Papers with number
0092.