Investor Reaction to Salient News in Closed-End Country Funds |
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| Authors: | Peter Klibanoff,Owen Lamont,& Thierry A. Wizman |
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| Affiliation: | J.L. Kellogg Graduate School of Management, Northwestern University,;Graduate School of Business, University of Chicago and NBER,;Caspian Securities, Inc. |
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| Abstract: | We use panel data on prices and net asset values to test whether dramatic country-specific news affects the response of closed-end country fund prices to asset value. In a typical week, prices underreact to changes in fundamentals; the (short-run) elasticity of price with respect to asset value is significantly less than one. In weeks with news appearing on the front page of The New York Times , prices react much more; the elasticity of price with respect to asset value is closer to one. These results are consistent with the hypothesis that news events lead some investors to react more quickly. |
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