Market-Wide Shocks and UK Closed-End Funds: A Taxonomy of Overreaction

28 Pages Posted: 14 May 2004

See all articles by Ana-Maria Fuertes

Ana-Maria Fuertes

Cass Business School, City University of London

Dylan C. Thomas

Queen Mary Unversity of London

Date Written: January 15, 2004

Abstract

This paper investigates the short-term behaviour of closed-end funds following large price shocks for a panel of 63 UK-traded funds. Our findings suggest that for the eight market-wide shocks, significant overreaction occurs. The level of overreaction is unrelated to the size of the funds. Both the small and difficult-to-arbitrage fund groups take longer to absorb the shocks. This is in contrast with the large and easy-arbitrage groups. However, the small funds group shows less overreaction and faster reversals after filtering out the difficult-to-arbitrage funds. The speed of reversal thus appears to be determined principally by ease-of-arbitrage.

Keywords: Overreaction, Reversal, Closed-end funds, Discount, Net asset value

JEL Classification: G1, F3

Suggested Citation

Fuertes, Ana-Maria and Thomas, Dylan C., Market-Wide Shocks and UK Closed-End Funds: A Taxonomy of Overreaction (January 15, 2004). EFMA 2004 Basel Meetings Paper, Cass Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=492963 or http://dx.doi.org/10.2139/ssrn.492963

Ana-Maria Fuertes

Cass Business School, City University of London ( email )

Faculty of Finance
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 207 477 0186 (Phone)
+44 207 477 8881 (Fax)

HOME PAGE: http://www.city.ac.uk/people/academics/ana-maria-fuertes

Dylan C. Thomas

Queen Mary Unversity of London ( email )

United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
168
Abstract Views
1,030
rank
214,890
PlumX Metrics