An empirical examination of the diversification benefits of U.K. international equity closed-end funds

Research output: Contribution to journalArticle

Abstract

I use the Bayesian approach of Wang (1998) to examine the diversification benefits of international equity U.K. closed-end funds (CEF) in the presence of market frictions. No short selling constraints substantially reduce, and in some cases eliminate the diversification benefits of CEF. However, adjusting for higher trading costs in the benchmark assets, the diversification benefits of the funds are significant. The paper also finds that when comparing to the international equity exchange-traded funds (ETF), that both groups of funds are necessary to maximize the benefits of international diversification.
LanguageEnglish
Pages23-34
Number of pages12
JournalInternational Review of Financial Analysis
Volume55
Early online date28 Oct 2017
DOIs
Publication statusPublished - 30 Jan 2018

Fingerprint

Equity
Diversification benefits
Closed-end funds
Assets
Bayesian approach
Exchange traded funds
Short selling
Trading costs
Benchmark
International diversification
Market frictions

Keywords

  • diversification benefits
  • Bayesian analysis
  • closed-end funds

Cite this

@article{1cdc8f0df40740dcaff1a29dc86f8e31,
title = "An empirical examination of the diversification benefits of U.K. international equity closed-end funds",
abstract = "I use the Bayesian approach of Wang (1998) to examine the diversification benefits of international equity U.K. closed-end funds (CEF) in the presence of market frictions. No short selling constraints substantially reduce, and in some cases eliminate the diversification benefits of CEF. However, adjusting for higher trading costs in the benchmark assets, the diversification benefits of the funds are significant. The paper also finds that when comparing to the international equity exchange-traded funds (ETF), that both groups of funds are necessary to maximize the benefits of international diversification.",
keywords = "diversification benefits, Bayesian analysis, closed-end funds",
author = "Jonathan Fletcher",
year = "2018",
month = "1",
day = "30",
doi = "10.1016/j.irfa.2017.10.010",
language = "English",
volume = "55",
pages = "23--34",
journal = "International Review of Financial Analysis",
issn = "1057-5219",

}

TY - JOUR

T1 - An empirical examination of the diversification benefits of U.K. international equity closed-end funds

AU - Fletcher, Jonathan

PY - 2018/1/30

Y1 - 2018/1/30

N2 - I use the Bayesian approach of Wang (1998) to examine the diversification benefits of international equity U.K. closed-end funds (CEF) in the presence of market frictions. No short selling constraints substantially reduce, and in some cases eliminate the diversification benefits of CEF. However, adjusting for higher trading costs in the benchmark assets, the diversification benefits of the funds are significant. The paper also finds that when comparing to the international equity exchange-traded funds (ETF), that both groups of funds are necessary to maximize the benefits of international diversification.

AB - I use the Bayesian approach of Wang (1998) to examine the diversification benefits of international equity U.K. closed-end funds (CEF) in the presence of market frictions. No short selling constraints substantially reduce, and in some cases eliminate the diversification benefits of CEF. However, adjusting for higher trading costs in the benchmark assets, the diversification benefits of the funds are significant. The paper also finds that when comparing to the international equity exchange-traded funds (ETF), that both groups of funds are necessary to maximize the benefits of international diversification.

KW - diversification benefits

KW - Bayesian analysis

KW - closed-end funds

UR - http://www.sciencedirect.com/science/journal/10575219?sdc=1

U2 - 10.1016/j.irfa.2017.10.010

DO - 10.1016/j.irfa.2017.10.010

M3 - Article

VL - 55

SP - 23

EP - 34

JO - International Review of Financial Analysis

T2 - International Review of Financial Analysis

JF - International Review of Financial Analysis

SN - 1057-5219

ER -