December Doldrums, Investor Distraction, and Stock Market Reaction to Unscheduled News Events
68 Pages Posted: 20 Sep 2017 Last revised: 28 Sep 2017
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: Suggested Citation
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
