Explaining inertia in closed-end fund prices

It is well known that closed-end fund prices display significant short-run inertia (under-reaction to movements in net asset value per share). This paper shows that price inertia seems to be absent from bond funds, and reports tests of alternative explanations of the phenomenon for US stock funds. The results are consistent with the hypothesis that reported net asset values have some degree of staleness. An alternative hypothesis that price inertia is caused by transaction costs is not supported by the data.