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Closed‐End Fund Expenses and Investment Selection
Author(s) -
Malhotra D.K.,
McLeod Robert W.
Publication year - 2000
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2000.tb01408.x
Subject(s) - closed end fund , open end fund , business , fund of funds , manager of managers fund , income fund , performance fee , expense ratio , stable value fund , finance , investment (military) , investment fund , feeder fund , fund administration , target date fund , institutional investor , corporate governance , politics , market liquidity , political science , law
Investment returns on closed‐end funds are highly volatile. Because expenses have a definite negative impact on closed‐end fund returns, investors should include the expense ratio as a criterion for fund selection in addition to performance, investment objective, and risk of the fund. This paper constructs a model of the expense ratio of closed‐end funds to explain cross‐sectional differences in the expense ratios for the period between 1989–1996. We relate closed‐end fund expenses to fund characteristics and identify the factors that can help investors choose low expense closed‐end funds.