Leverage and closed-end bond funds performance

Abstract

Unlike mutual funds, closed-end funds may use leverage in their capital structure, either via preferred stock or borrowing. This paper compares the performance leveraged and non-leveraged closed-end bond funds. The results show no significant difference between leveraged and non-leveraged funds in terms of net asset value and market price performance. The study also finds statistically significant differences between leveraged and non-leveraged closed-end bond funds in terms of premium/discount from the net asset value, expense ratios, size, and turnover ratios.