Are IPOs of closed-end funds underpriced in the U.S. market?

Abstract

The purpose of this study is to determine whether or not closed-end funds initial public offerings (IPOs) are underpriced or overpriced in the U.S. Market. Through the analysis, we conclude that 202 out of 229 selected sample of closed-end funds offer their shares at premium in the U.S. Market. Moreover, 47.6% of closed-end funds offer their shares at premium of 5% to 10%, 27.95% of funds issue shares at premium of 0% to 5%, and only small part of funds offer shares at premium over 10%. And also, the four factor regression result shows that only fund size had no certain relationship with fund premium. However other three factors, the turnover rate, composition, and fund performance are statically significant in the regression.