Z-Statistic

A z-statistic, or a z-score, measures the relative discounts and relative premiums for closed-end funds.

Like open-end funds, closed-end funds have a net asset value (NAV), which is the total value of its underlying investments. The difference between a closed-end fund’s NAV and its share price is considered an absolute discount or premium. Closed-end funds with share prices below their NAVs are trading at a discount. If their share prices are above their NAVs, the closed-end funds are trading at a premium. The z-score can help put the relative discount or premium into perspective.

The difference between the current premium and average historical premium, divided by the premium’s standard deviation, is a premium’s z-score. For a premium, a positive z-score implies the current premium is higher than average. For a discount, a negative z-score implies the discount is lower than average.

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Z-Statistic

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