Academic Journal
A NAV a Day Keeps the Inefficiency Away? Fund Trading Strategies using Daily Values
18 pages 2005 Financial Services Review
Journal Details
Financial Services Review, 2005 Vol. 14 Pages 213-230
Keywords
Finance
Journal Article, Academic Journal
Overview
Previous research documents the value of closed-end fund trading rules based on the size of the
weekly discount. The growing number of closed-end funds that provide daily net asset value data
provides an opportunity to test the profitability of short-term fund trading strategies. We find that
short-term trading strategies that purchase fund shares after large negative discount changes are
profitable, on average, even when transaction costs are incorporated. However, strategies that short
sell fund shares after large positive discount changes do not produce an average profit. The limited
amount of trading in closed-end funds may make it difficult to achieve short-term profits from discount
fluctuations. © 2005 Academy of Financial Services. All rights reserved.
weekly discount. The growing number of closed-end funds that provide daily net asset value data
provides an opportunity to test the profitability of short-term fund trading strategies. We find that
short-term trading strategies that purchase fund shares after large negative discount changes are
profitable, on average, even when transaction costs are incorporated. However, strategies that short
sell fund shares after large positive discount changes do not produce an average profit. The limited
amount of trading in closed-end funds may make it difficult to achieve short-term profits from discount
fluctuations. © 2005 Academy of Financial Services. All rights reserved.