by David Lefty
Abstract
This paper examines the effect of systematic beta risk, expense ratios, and fund
size on the cross-sectional variation of closed-end fund discounts. Using a methodology
similar to that of Gemmill and Thomas (2002) and Flynn (2004) on a sample of 50 U.S.
closed-end funds, the data indicate that expense ratios have a significant positive effect
on discounts for my entire sample and systematic beta risk has a significant positive
effect on debt fund discounts. These results reject hypotheses implied by both noise
trader and agency cost theories with respect to closed-end fund discounts.
Professor Edward Tower, Faculty Advisor
JEL Codes: O51,
