A Surprise That Keeps You Awake: Overnight Returns After Earnings Announcements

63 Pages Posted: 6 Jan 2019 Last revised: 14 Oct 2020

See all articles by Fabian Gamm

Fabian Gamm

University of Mannheim - Department of Finance

Date Written: June 3, 2019

Abstract

I dissect stock returns after earnings announcements into their overnight and intraday components and document strong positive abnormal overnight returns for several weeks after both large positive and negative earnings surprises. This finding is in line with attention-induced buying pressure. Consistently, the effect exists only when retail investors are net buyers and pay attention to the surprise. Corresponding intraday returns have the opposite sign, which makes this pattern invisible in close-to-close returns. Finally, results are stronger during high sentiment periods as well as for hard-to-arbitrage firms and weaker if the average investor holds the stock at a gain.

Keywords: Investor Attention, Large Earnings Surprises, Overnight and Intraday Stock Returns, Retail and Institutional Investor Trading, Disposition Effect

JEL Classification: G11, G12, G14, G41

Suggested Citation

Gamm, Fabian, A Surprise That Keeps You Awake: Overnight Returns After Earnings Announcements (June 3, 2019). Proceedings of Paris December 2020 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3293638 or http://dx.doi.org/10.2139/ssrn.3293638

Fabian Gamm (Contact Author)

University of Mannheim - Department of Finance ( email )

L9,1-2
Mannheim, 68161
Germany

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