Discount Puzzle Of Closed-End Mutual Funds: A Case Of Bangladesh

TL;DR

This study investigates the closed-end fund puzzle in Bangladesh, analyzing how fund size, maturity, and turnover influence discounts using panel regression on data from 36 funds between 2016 and 2019.

Contribution

It provides empirical evidence on the determinants of CEF discounts in an emerging market, highlighting the roles of fund size, maturity, and turnover.

Findings

Fund size and maturity positively affect discounts.

Turnover negatively impacts discounts.

Other variables like top 10 investments, dividend yield, and fund age are insignificant.

Abstract

The paper intends to perform a relevant study on the closed-end fund puzzle in the perspective of an emerging market. Quarterly data of 36 closed-end mutual funds traded in Dhaka Stock Exchange are collected over the sample period of 2016 to 2019. Dependent and independent variables are mapped down by exploring previous researches. Weight of top 10 investments, fund size, fund age, fund maturity, turnover and dividend yield are taken as explanatory variable to analyze the impact on CEF discount. A fixed effects panel regression is performed on the data set with few diagnostic tests to ensure the reliability of the analysis conducted. The results show that, the variable fund size and fund maturity have a significant positive and turnover has a significant negative impact on CEF discount while the impact of weight of top 10 investments, dividend yield and fund age are found insignificant.