The Persistence and Predictability of Closed-End Fund Discounts

  title={The Persistence and Predictability of Closed-End Fund Discounts},
  author={Burton Gordon Malkiel and Yexiao Xu},
  journal={Mutual Funds},
It is well-known that the level of closed-end fund discounts appears to predict the corresponding fund's future returns. We further document that such predictability decays slowly. The popular explanations, including the tax effect, investor sentiment risk, and the funds's dividend yield, do not fully account for the observed predictability. At the same time, discounts are very persistent especially on an aggregate level. Using an AR(1) model for discounts, we demonstrate that such… 

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