Wrestling the bear, riding the bull: Closed-end versus open-end mutual fund performance during shifts in the market

Academic literature has covered many facets of both stock and mutual fund performance over the years. However, the comparison of closed-end versus open-end mutual funds' performance and operations has not been written about to a great degree. This paper compares open and closed-end fund performance during turns in the market for both aggregate and weighted aggregate monthly returns. Weighted aggregate returns for closed-end and open-end funds are calculated in the form of equally and value-weighted monthly returns. I employ the use of the Capital Asset Pricing Model, Fama-French (1993) Three Factor, and the Carhart (1997) Four Factor Models on the two types of mutual funds from January 1980 to November 2006. The aggregate monthly return results show that closed-end mutual funds outperform open-end mutual funds during Bear market periods, while open-end funds outperform closed-end funds during Bull market periods, at risk adjusted basis. Weighted aggregate return results are mainly similar to the aggregate monthly return results.