Closed‐End Funds: A Survey

This survey reviews the evolving literature on closed‐end fund discounts. Many studies have attempted to explain the existence and the behavior of the discount to net asset value, emphasizing biases in the calculation of NAV, agency costs, tax‐timing options and market segmentation. None has been able to provide a full explanation. As a result, some researchers have found it necessary to resort to models of limited rationality. This gives rise to potential opportunities for exploiting the discount. We summarize the findings from over 70 studies of closed‐end funds, and present directions for future research.