Investor Attention and the Pricing of Earnings News

Handbook of Sentiment Analysis in Finance, Forthcoming

40 Pages Posted: 17 Jul 2014 Last revised: 4 Oct 2016

See all articles by Asher Curtis

Asher Curtis

University of Washington

Vernon J. Richardson

University of Arkansas at Fayetteville

Roy Schmardebeck

The University of Tennessee, Knoxville - Haslam College of Business, Accounting and Information Management

Date Written: July 16, 2014

Abstract

We investigate whether investor attention is associated with the pricing (and mispricing) of earnings news where investor attention is measured using social media activity. We find that high levels of investor attention are associated with greater sensitivity of earnings announcement returns to earnings surprises, with the effect being strongest for firms that beat analysts’ forecasts. This appears to be appropriate pricing, on average, as only firms with low levels of attention are associated with significant post-earnings-announcement drift. Our results are distinct from other information sources including traditional media outlets, financial blogs, and internet search engine activity. Our results are consistent with investor attention observed in social media activity having distinct effects on the pricing and mispricing of earnings news.

Keywords: Investor Attention, Investor Sentiment, Social Media, Earnings Announcements, Capital Markets.

Suggested Citation

Curtis, Asher and Richardson, Vernon J. and Schmardebeck, Roy, Investor Attention and the Pricing of Earnings News (July 16, 2014). Handbook of Sentiment Analysis in Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2467243 or http://dx.doi.org/10.2139/ssrn.2467243

Asher Curtis (Contact Author)

University of Washington ( email )

Seattle, WA 98195
United States

Vernon J. Richardson

University of Arkansas at Fayetteville ( email )

401 WCOB
Fayetteville, AR 72701
United States

Roy Schmardebeck

The University of Tennessee, Knoxville - Haslam College of Business, Accounting and Information Management ( email )

The Boyd Center for Business and Economic Research
Knoxville, TN 37996
United States

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