Abstract
This study utilizes a tonnement-type modelling process to provide evidence of the dynamic adjustment of investment company share prices toward an estimate of the underlying value of the shares. Friday closing prices and reported net asset values for 45 closed-end investment companies are investigated to test the model's ability to describe share price movements. Weekly price changes are shown to exhibit significant negative serial correlation, a result not anticipated by the traditional random-walk view. More importantly, one finds that returns generated from share price changes are significantly affected by the dynamic adjustment of price toward an estimate of the underlying value of the shares.
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