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School of Business and Management

School Research Seminar Series - What Explains IPOs of Closed-End Funds: Managerial Ability, Illiquidity, or Sentiment?

28 May 2014

Time: 1:00 - 2:00pm
Venue: FB 1.15, 4th Floor Bancroft Building, Mile End Campus, E1 4NS


Dylan C. Thomas, Cass Business School


Why buy a closed-end-fund at IPO, when it is likely to trade at a discount shortly after?   Three competing explanations are that new funds outperform, that investors gain from access to illiquid assets, and that investors are influenced by time-varying sentiment. Using 261 equity-fund UK IPOs, we reject the first two explanations: the average new fund neither outperforms nor generates a liquidity gain. By contrast, the sentiment theory is supported by investor surveys, stock-market movements, and synchronous flows into open-end funds. In a regression that includes proxies for all three theories, sentiment is by far the most significant influence

*Research themes: Financial Markets; Management and Organisation

*Chaired by Professor Gulnur Muradoglu

*Lunch from 12:30pm in the kitchen

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