Tax Reforms, Investor Sentiment and Closed-End Fund Performance

Authors

  • Umesh Kumar State University of New York at Canton

DOI:

https://doi.org/10.47941/ijf.1040

Keywords:

Tax Reforms, Investor Sentiment

Abstract

Purpose: Tax reforms have a significant impact on asset prices and shareholders' wealth. The Tax Cuts and Jobs Act 2017 (TCJA) reduces the tax obligations for both households and businesses. This paper investigates the relationship between closed-end funds performance and investor sentiment induced by tax reforms.

Methodology: Two proxies of investor sentiment are used to measure the impact on closed-end fund (CEF) performance.

Results: The results reveal that overall, tax reforms have a positive effect on the closed-end fund valuations. Institutional investors' sentiment takes a differential view from individual investors on CEF returns. Institutional investors' sentiment does not show a relationship with fund returns. Medium size CEFs benefit more from tax reforms.

Unique Contribution to Theory, Policy and Practice: Despite mixed signals, the results suggest that TCJA has influenced the investors' sentiment resulting in excessive optimism.

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Published

2022-09-24

How to Cite

Kumar, U. K. (2022). Tax Reforms, Investor Sentiment and Closed-End Fund Performance. International Journal of Finance, 7(4), 71–86. https://doi.org/10.47941/ijf.1040

Issue

Vol. 7 No. 4 (2022)

Section

Articles

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Copyright (c) 2022 Umesh Kumar

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