Do Derivative Instruments Play a Role in Performance Theory? The Turkish Closed-End Funds Case

Burak Pirgaip


Market prices of closed-end funds (CEF) deviate from their net asset values (NAV) which is known as “CEF puzzle”. I attempt to show from the Turkish experience that CEF discounts/premia predict the corresponding CEF’s future returns, in the light of managerial performance theory. But derivatives facet of the subject matter has not been uncovered so far. Therefore I hypothesize that performance of derivative user CEF are better estimators for discounts/premia than non-users. I show a significant positive relation between CEF discounts/premia and future NAV performance. However, this relation seems not to be more explicit for derivative user CEF than non-users.

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Applied Economics and Finance    ISSN 2332-7294 (Print)   ISSN 2332-7308 (Online)

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