Abstract

http://ssrn.com/abstract=2129422
 
 

References (88)



 


 



The Neuroscience Behind the Stock Market's Reaction to Corporate Earnings News


Jan Barton


Emory University

Gregory Berns


Emory University

Andrew Brooks


Emory University

August 13, 2012


Abstract:     
Using functional magnetic resonance imaging, we capture neural activity in the ventral striatum — a key area in the human brain’s reward processing circuit — of 35 adult investors learning the earnings per share disclosed by 60 publicly traded companies. Before imaging, investors forecasted each company’s earnings and took either a long or a short position in its stock. We find that striatal activation in investors’ brains explains just as much or more of the variation in risk-adjusted stock returns and abnormal share trading around earnings announcements than the dollar or percentage magnitude of the earnings surprise itself. We also find that, in aggregating investors’ individual reactions, the market seems to weigh more heavily the reactions of investors with greater brain activation, even after controlling for their financial expertise, forecasting ability, investment positions, and overall sensitivity to rewards and punishment.

Number of Pages in PDF File: 36

Keywords: financial accounting, earnings surprise, market reaction, human brain, neuroeconomics, neuroaccounting, fMRI

JEL Classification: M4, G1

working papers series


Download This Paper

Date posted: August 15, 2012  

Suggested Citation

Barton, Jan and Berns, Gregory and Brooks, Andrew, The Neuroscience Behind the Stock Market's Reaction to Corporate Earnings News (August 13, 2012). Available at SSRN: http://ssrn.com/abstract=2129422 or http://dx.doi.org/10.2139/ssrn.2129422

Contact Information

Jan Barton (Contact Author)
Emory University ( email )
1300 Clifton Road
Atlanta, GA 30322-2722
United States
404-727-6398 (Phone)
404-727-6313 (Fax)
Gregory Berns
Emory University ( email )
Atlanta, GA 30322
United States
Andrew Brooks
Emory University ( email )
Atlanta, GA 30322
United States
Feedback to SSRN


Paper statistics
Abstract Views: 1,491
Downloads: 304
Download Rank: 55,508
References:  88
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.282 seconds