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Investor Reaction to Salient News in Closed‐End Country Funds
Author(s) -
Klibanoff Peter,
Lamont Owen,
Wizman Thierry A.
Publication year - 1998
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.265570
Subject(s) - net asset value , monetary economics , economics , asset (computer security) , value (mathematics) , financial economics , elasticity (physics) , salient , business , econometrics , finance , materials science , computer security , machine learning , artificial intelligence , computer science , composite material
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.