Download this Paper Open PDF in Browser

December Doldrums, Investor Distraction, and Stock Market Reaction to Unscheduled News Events

68 Pages Posted: 20 Sep 2017 Last revised: 28 Sep 2017

Sudheer Chava

Georgia Institute of Technology - Scheller College of Business

Nikhil Paradkar

Georgia Institute of Technology - Scheller College of Business

Date Written: August 31, 2016

Abstract

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

Chava, Sudheer and Paradkar, Nikhil, December Doldrums, Investor Distraction, and Stock Market Reaction to Unscheduled News Events (August 31, 2016). Georgia Tech Scheller College of Business Research Paper No. 17-25; 30th Australasian Finance and Banking Conference 2017. Available at SSRN: https://ssrn.com/abstract=2962476

Sudheer Chava

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

HOME PAGE: http://www.prism.gatech.edu/~schava6/

Nikhil Paradkar (Contact Author)

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Paper statistics

Downloads
159
Rank
160,518
Abstract Views
486