INVESTOR REACTION TO SALIENT NEWS IN CLOSED-END COUNTRY FUNDS

We use panel data on prices and net asset values to test whether drama tic country-specific news affects the response of closed-end country f und prices to asset value. In a typical week, prices underreact to cha nges in fundamentals; the (short-run) elasticity of price with respect to asset value is significantly less than one. In weeks with news app earing 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 le ad some investors to react more quickly.