Information Content of Closed-End Fund Discounts and Premiums: The Case for Ex-Dividend Performance
Date Issued
2008
Date
2008
Author(s)
Lu, Chien-Liang
Abstract
This study examines the ex-dividend performance of closed-end funds (CEFs) traded in Taiwan and the US. The findings of this study are summarized as follows:. CEFs traded with discount in Taiwan have an cumulative abnormal return of 12.1% for the 10 day period after ex-dividend day, while CEFs traded with premium in Taiwan have an cumulative abnormal return of -3.32% for the 10 day period after ex-dividend day.EFs traded with discount in the US have an cumulative abnormal return of 5.52% for the 10 day period after ex-dividend day, while CEFs traded with premium in the US have an cumulative abnormal return of -1.1% for the 10 day period after ex-dividend day.. The premium/discount ratio and the size of dividend distribution are two explanation factors of the ex-dividend performance. The premium/discount ratio has negative influence to the abnormal returns of CEFs after ex-dividend day, while the size of dividend distribution has positive influence to the abnormal returns of CEFs after ex-dividend day.. The abnormal returns of CEFs before and after the ex-dividend day are correlated negatively. This implies investors may sell CEFs before ex-dividend day and buy them back after ex-dividend day for tax purpose.
Subjects
Closed-End Fund
Discount and Premium
Ex-Dividend Performance
Type
thesis
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