December Doldrums, Investor Distraction, and the Stock Market Reaction to Unscheduled News Events
58 Pages Posted: 20 Sep 2017 Last revised: 1 Jul 2022
Date Written: August 31, 2016
We examine how investor distraction during the December holiday season impacts the stock market’s reaction to salient firm-specific news and whether this response is different for scheduled versus unscheduled news releases. We find that unscheduled credit rating downgrades and 8-K filings generate significantly weaker market responses in December, but find no equivalent effect for pre-scheduled earnings announcements. Consistently, we find lower retail and institutional investor attention in December towards unscheduled news only. Firm prominence mitigates this December distraction effect. Our results highlight how investor distraction in December 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