Aggregate Market Attention Around Earnings Announcements

50 Pages Posted: 11 Jan 2015  

Abdullah Kumas

University of Richmond - Robins School of Business

William M. Cready

University of Texas at Dallas - Naveen Jindal School of Management

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Date Written: January 10, 2015

Abstract

This study examines the relation between both number and news content of earnings disclosures by firms and aggregate stock market trading activity. Consistent with the Hirshleifer, Lim, and Teoh (2009a) distraction hypothesis, among announcing firms the number of contemporaneous announcers reduces trading responses. However, among non-announcers the opposite holds. Trading in non-announcing stocks increases with number of announcers. Hence, while high numbers of announcing firms distract attention from each other they actually increase the level of attention given to the aggregate market by investors. This effect is also stronger when announcing firms are large in size, which is consistent with the idea of larger firms providing more macro-relevant information to the market (e.g., Anilowski, Feng, and Skinner 2007; Bonisall, Bozanic, and Fischer 2013). The news content of announced earnings also has several distinct marketwide trading impacts. Negative aggregate news is positively associated with marketwide trading, consistent with the idea that bad news is generally more macro-relevant than good news (Williams 2014). Earnings surprise magnitudes, both overall and individual, also seem to matter much more for marketwide trading when the number of announcers is large, consistent with the idea that the market is more sensitive to earnings news in periods when earnings disclosures are clustered (e.g., “earnings seasons”).

Keywords: Earnings Announcement, Attention Hypothesis, Information Conveyance, and Trading Volume

JEL Classification: G02, G14

Suggested Citation

Kumas, Abdullah and Cready, William M., Aggregate Market Attention Around Earnings Announcements (January 10, 2015). Available at SSRN: https://ssrn.com/abstract=2547936 or http://dx.doi.org/10.2139/ssrn.2547936

Abdullah Kumas (Contact Author)

University of Richmond - Robins School of Business ( email )

28 westhampton way
Richmond, VA virginia 23173
United States

William M. Cready

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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