Investor reaction to salient news in closed-end country funds

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Publication Details

Output type: Journal article

Author list: Klibanoff P, Lamont O, Wizman TA

Publisher: Wiley

Publication year: 1998

Journal: The Journal of Finance (0022-1082)

Volume number: 53

Issue number: 2

Start page: 673

End page: 699

Number of pages: 27

ISSN: 0022-1082

eISSN: 1540-6261

Languages: English-Great Britain (EN-GB)

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Open access status: green

Full text URL: http://papers.nber.org/papers/w5588.pdf

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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