Closed-end-fund discount reversion

In plain terms

A closed-end fund trades as its own share, which can drift to a discount or premium against the value of what it actually holds. When that gap stretches unusually wide, history says it tends to close again.

How it works

Funds are ranked by how far each discount sits from its own norm — long the unusually cheap against the unusually rich, or against a liquid sector ETF — held market-neutral and left to converge.

What it’s tested against

The setup is survivorship-conservative: funds that close do so by converging to net asset value, which works against the signal rather than flattering it, and a placebo confirms it reads structure, not noise. The full-strength long/short looked strong on paper, but it leans on shorting illiquid funds; the retail-implementable basket-versus-ETF version turned out to be roughly half equity beta, and once fully beta-neutral and costed honestly the residual edge was marginal and front-loaded into the same week — a microstructure artefact, not slow reversion.

Data

Closed-end-fund price and net-asset-value history.

Researched — a real cross-sectional phenomenon that does not survive honest beta-stripping and cost; kept as a documented funding-grade result, closed as a tradeable edge.