ETF or CEF, which one is the best?

• Autor(a) principal: Pereira, João Pedro Alves
• Data de Publicação: 2014
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/10255
• topic: Performance analysis; CEF; ETF; Liquidity; Mispricing

This work performs an analysis between Exchange Traded-Funds (ETF) and Closed-end Funds (CEF), to help the common investor to decide for the best fund. This analysis comprises a sample from the U.S. market fund that included 46 funds: 27 CEFs and 19 ETFs that represent 13 different benchmarks. All the funds are required to have at least five years of observations. This work makes a comparative analysis of the performance of both funds using the Sharpe, Treynor, Appraisal, Hit and Sortino Ratio. Results showed a clear superiority of ETFs, in the majority of benchmarks, ETF provided the best performance in two cases: the first, using all observations from all funds and the second using only the common period of observations between all funds with the same benchmark. Next, the analysis focus on the presence of mispricing, to look for which fund in the sample, deviates furthest from the Net Asset Value. It was concluded that the large majority of the funds show mispricing, but ETF funds trade at premium while CEF funds trade at discount. Finally, CEF volume is analyzed. The goal is to understand on the impact of CEF average trading volume after the inception of a similar ETF. The evidence shows that in most cases the CEF trading volume increased after the inception of a peer ETF.