‘Open-ending’ closed-end funds

Abstract

Open-ending a closed-end fund forces the price of the fund's shares to their net asset value. Open-ending behavior is shown to correspond in predictable ways to the incentive to open-end and to potential resistance to open-ending. Moreover, closed-end fund share prices begin to generate statistically significant positive abnormal returns well in advance of the formal announcement of the open-ending. Although a small part of the total abnormal return is not entirely exhausted until after the announcement, such market price performance is broadly consistent with a semi-strong form efficient market.