FURTHER INTELLIGENCE ON CLOSED-END FUNDS
DOI:
https://doi.org/10.61841/cf0qth29Keywords:
liquidity, inflation, leverage, discount, equity, CAPMAbstract
This study shows inflation has distinct short and long-term effects on closed-end funds (CEFs) liquidity. With an inverse relationship between the prime rate and liquidity, CEFs use leverage. According to Datar (2001), an inverse relationship between liquidity and CEFs’ discounts is expected. As robustness check, this study estimates the risk-free rate using the capital asset pricing model (CAPM). A validated rate strongly supports the existence of these relations, adding intelligence about CEFs discounts and liquidity.
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