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

58 Pages Posted: 20 Sep 2017 Last revised: 1 Jul 2022

See all articles by Sudheer Chava

Sudheer Chava

Georgia Institute of Technology - Scheller College of Business

Nikhil Paradkar

University of Georgia

Date Written: August 31, 2016

Abstract

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

Chava, Sudheer and Paradkar, Nikhil, December Doldrums, Investor Distraction, and the 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 or http://dx.doi.org/10.2139/ssrn.2962476

Sudheer Chava

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

800 West Peachtree St.
Atlanta, GA 30308
United States

HOME PAGE: http://https://fintech.gatech.edu

Nikhil Paradkar (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
497
Abstract Views
2,352
rank
79,860
PlumX Metrics