The effect of macroeconomic news on German closed-end funds

This paper examines how investors assimilate information obtained from a set of German and U.S. macroeconomic news releases, and register their response on German closed-end fund net asset values (NAVs) and share prices. Specifically, three German Funds traded in the NYSE are chosen and their response to five common types of macroeconomic announcements is investigated. The results indicate that there are systematic differences in the way German and U.S. investors react to information about the two respective economies. We find some commonality in the response of NAV and share price to certain types of announcements, notably industrial production and PPI releases in Germany and the U.S., but a strong divergence is documented when examining other common news releases. The results lead us to believe that the time-varying behavior of fund discounts is most likely attributable to the divergent assessments held by German and U.S. investors, and are in turn, influenced by the security composition and objective of the fund itself.