Sleep Disruptions and Information Processing in Financial Markets

55 Pages Posted: 5 Oct 2021 Last revised: 11 Apr 2022

See all articles by William Bazley

William Bazley

University of Kansas

Carina Cuculiza

Marquette University

Kevin Pisciotta

University of Kansas - School of Business

Date Written: April 10, 2022

Abstract

Despite evidence of the importance of sleep for cognitive performance, prior research finds limited effects of sleep disruptions in financial markets. This is puzzling because financial decisions rely on higher-order cognitive processes that are typically affected by sleep. We reconcile this dissonance by examining forecasts of corporate earnings by non-professional and professional analysts. We find that non-professional forecasters exhibit a significant decline in their forecast accuracy and optimism following spring daylight saving time changes relative to professional forecasters. Using a separate sample of professional equity analysts' forecasts, we continue to find that the information processing of analysts with less expertise is disproportionately negatively affected following sleep disruptions. Placebo tests provide support for sleep disruptions as the main driver of these effects. Overall, our evidence that information processing by less experienced and skilled market participants is particularly vulnerable to sleep disruptions provides one compelling reason why aggregate financial markets seem to be immune to sleep effects even though individual participants are not.

Keywords: Sleep, Forecasts, Expectations, Sell-side Analysts

JEL Classification: G14, G24, G41, G50

Suggested Citation

Bazley, William and Cuculiza, Carina and Pisciotta, Kevin, Sleep Disruptions and Information Processing in Financial Markets (April 10, 2022). Available at SSRN: https://ssrn.com/abstract=3934115 or http://dx.doi.org/10.2139/ssrn.3934115

William Bazley

University of Kansas ( email )

3143 Capitol Federal Hall
1654 Naismith Drive
Lawrence, KS 66045
United States

Carina Cuculiza

Marquette University ( email )

P.O. Box 1881
Milwaukee, WI 53201-1881
United States

Kevin Pisciotta (Contact Author)

University of Kansas - School of Business ( email )

Capital Federal Hall
1654 Naismith Dr
Lawrence, KS 66045
United States

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