Arbitrage bounds and the time series properties of the discount on UK closed-end mutual funds

Copeland, Laurence 2006. Arbitrage bounds and the time series properties of the discount on UK closed-end mutual funds. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University.

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Abstract

In a dataset of weekly observations over the period since 1990, the discount on UK closed-end mutual funds is shown to be nonstationary, but reverting to a nonzero long run mean. Although the long run discount could be explained by factors like management expenses etc., its short run �uctuations are harder to reconcile with an arbitrage-free equilibrium. In time series terms, there is evidence of long memory in discounts consistent with a bounded random walk. This conclusion is supported by explicit nonlinearity tests, and by results which suggest the behaviour of the discount is perhaps best represented by one of the class of Smooth-Transition Autoregressive (STAR) models.

Item Type:	Monograph (Working Paper)
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Cardiff University
Date of First Compliant Deposit:	30 March 2016
Last Modified:	04 Jun 2017 08:25
URI:	https://orca.cardiff.ac.uk/id/eprint/77718

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