A Surprise That Keeps You Awake: Overnight Returns After Earnings Announcements
63 Pages Posted: 6 Jan 2019 Last revised: 14 Oct 2020
Date Written: June 3, 2019
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: Suggested Citation