Abstract

The thesis deals with the evolution of Closed End Funds (CEFs) styles over time, performance of CEFs by investment objective, persistence of CEF performance, and the tournament aspects of within-calendar-year performance. The number and dollar investment in CEFs with various investment objectives are studied. The change in investment in funds with particular investment objective(s) is also studied for the period, 1981-1995. Empirical results based on the Jensen measure are obtained for funds with different investment objectives. These results are obtained using several different criteria for both weekly market price returns and weekly NAV returns. Empirical results suggest that Corporate Bond CEFs and Municipal Bond CEFs have cross-sectional alphas of more than 1.5% and International Equity CEFs have negative cross-sectional alpha of 2.1%. International Equity CEFs beta values suggest higher sensitivity relative to the CRSP equity index. Tests using data for the common period 1991-95 reveals that all CEFs have positive cross-sectional alphas except for International Equity CEFs. Also, our hypothesis that mean alphas are negative during the first year of fund inception is confirmed by our regression results. Tests of winner-winner or winner-loser effects (tests for continuation or reversal of persistence) using monthly data reveals that four of fourteen years exhibited persistence, four years had reversals and one year had ambiguous results. A study of significant mid-tournament time period in altering risk/return postures of CEFs reveal that major decisions on re-balancing are taken in the first half of a calendar year. Tests are done for funds with different year-ends. Tests reveal that, regardless of the year-end for any CEF considered within the portfolio, the January to June period exhibits very significant changes in the risk/return postures of CEFs.