December Doldrums, Investor Distraction, and Stock Market Reaction to Unscheduled News Events
68 Pages Posted: 20 Sep 2017 Last revised: 4 Oct 2018
Date Written: August 31, 2016
We document that the stock market's reaction to unscheduled firm-specific news such as credit rating downgrades and 8-K filings is significantly weaker during December as compared to other months. In contrast, the market's reaction to scheduled earnings announcements is not significantly different in December. We find a similar pattern for trading volume. However, this December distraction does not affect firms with greater visibility, such as larger firms, firms with higher analyst following, or higher institutional ownership. Our results highlight how investor distraction during the December holiday season can lead to a muted market reaction to unscheduled, but salient, firm-specific news.
Keywords: Investor inattention, unscheduled events, credit ratings, 8-K filings
JEL Classification: G02, G12, G14, G24
Suggested Citation: Suggested Citation