Keeping Your Cool: An Attention Driven Buying Pressure After Earnings News

63 Pages Posted: 16 Sep 2020 Last revised: 19 Jul 2021

See all articles by Jacob Hald Hansen

Jacob Hald Hansen

Aarhus University - Department of Economics and Business Economics; Aarhus University - CREATES

Date Written: July 10, 2020

Abstract

This paper uses a novel and direct retail investor attention proxy to show that retail investor attention is important for information efficiency around earnings announcements. The main finding is the presence of asymmetric patterns in subsequent market responses to earnings surprises when retail investors are the most attentive. If earnings news is bad, a distinct drift is present. The drift is consistent with an attention-induced buying pressure, as attention predicts subsequent attention, abnormal trading, and long-run underperformance. If the news is good, then even though the announcement must also have been attention-grabbing, no drift is observed. The effects are intensified for stocks with higher limits to arbitrage and when institutional investors are the least attentive.

Keywords: Investor Attention, Retail Investors, Earnings Announcements, Information Diffusion, Buying Pressure

JEL Classification: G10, G12, G14, G40

Suggested Citation

Hald Hansen, Jacob, Keeping Your Cool: An Attention Driven Buying Pressure After Earnings News (July 10, 2020). Available at SSRN: https://ssrn.com/abstract=3648201 or http://dx.doi.org/10.2139/ssrn.3648201

Jacob Hald Hansen (Contact Author)

Aarhus University - Department of Economics and Business Economics ( email )

Fuglesangs Alle 4
Aarhus, 8210
Denmark

HOME PAGE: http://pure.au.dk/portal/da/persons/jacob-hald-hansen(5b191a3a-0a2c-4b10-b89f-1464f3532b65).html

Aarhus University - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

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