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Investor Reaction to Salient News in Closed-End Country Funds

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  • PETER KLIBANOFF
  • OWEN LAMONT
  • THIERRY A. WIZMAN

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. Copyright The American Finance Association 1998.

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Paper provided by Center for Research in Security Prices, Graduate School of Business, University of Chicago in its series CRSP working papers with number 346.

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Handle: RePEc:wop:chispw:346

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  1. Andrew W. Lo & A. Craig MacKinlay, 1987. "Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test," NBER Working Papers 2168, National Bureau of Economic Research, Inc.
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  13. Bodurtha, James N, Jr & Kim, Dong-Soon & Lee, Charles M C, 1995. "Closed-End Country Funds and U.S. Market Sentiment," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 8(3), pages 879-918.
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