Inattention as a Limit to Arbitrage: Evidence from School Holidays

40 Pages Posted: 19 Nov 2014 Last revised: 22 Sep 2016

See all articles by Lily H. Fang

Lily H. Fang

INSEAD - Finance

Melissa Lin

Erasmus University Rotterdam; Tinbergen Institute

Yuping Shao

National University of Singapore (NUS)

Date Written: August 31, 2016


We document that institutional trading and short selling around earnings announcements are 15%-20% lower during school holidays than other times. This reduced trading cannot be explained by liquidity or short sale constraints. Prices react to negative news released during school holidays with a significant delay. A zero-investment strategy that invests in the after-holiday drift earns abnormal returns of over 70 basis points per month, and this anomaly is stronger among large, liquid stocks with high institutional holdings. Collectively, our evidence suggests that even professional investors are susceptible to inattention which can act as a limit to arbitrage and has pricing implications.

Keywords: anomaly; seasonality; investor inattention; volume; short selling; stock returns

JEL Classification: G12, G14, G15

Suggested Citation

Fang, Lily H. and Lin, Chunmei and Shao, Yuping, Inattention as a Limit to Arbitrage: Evidence from School Holidays (August 31, 2016). Available at SSRN: or

Lily H. Fang (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex

Chunmei Lin

Erasmus University Rotterdam ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA

Yuping Shao

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics