A closer look at trading strategies for U.S. equity closed-end investment companies

Abstract

Earlier studies of U.S. closed-end investment companies (CEICs) examined whether the discount between CEIC price and net asset value could be exploited to gain excess returns. We advance these studies by investigating many more trading strategies and various transaction costs. We find that the role of the span between buy and sell trigger points is highly significant in determining returns, and that transaction costs impact returns and mitigate the influence of the trigger point span. Moreover, the 10 most successful strategies for each transaction cost level exhibit lower coefficients of variation than does the Standard & Poor’s 500 (S&P 500) index.