Retail Trading around Earnings Announcements: Evidence from Robinhood Traders

56 Pages Posted: 11 Dec 2022 Last revised: 26 Jun 2023

See all articles by Qiqi Liang

Qiqi Liang

Old Dominion University - Finance

Mohammad Najand

Old Dominion University - Finance

David D. Selover

Old Dominion University - Economics Department

Licheng Sun

Old Dominion University

Date Written: June 20, 2023

Abstract

We document that retail investors from the discount broker Robinhood swarm into stocks with pending earnings announcements and stay away from them immediately after the announcements. We study four competing explanations for this phenomenon: liquidity provision, informed trading, lottery preference, and herding by noise traders. We find strong evidence that, immediately around earnings announcements, Robinhood investors’ behavior is primarily driven by attention-induced noise trading. Our results offer new insights into retail traders’ motivation for trading when they face heightened uncertainty from earnings announcements.

Keywords: Retail Investors, Earnings Announcements, Investor Attention, Lottery Preference, Informed Trading, Liquidity Provision

JEL Classification: G02, G11, G12

Suggested Citation

Liang, Qiqi and Najand, Mohammad and Selover, David D. and Sun, Licheng, Retail Trading around Earnings Announcements: Evidence from Robinhood Traders (June 20, 2023). Available at SSRN: https://ssrn.com/abstract=4294065 or http://dx.doi.org/10.2139/ssrn.4294065

Qiqi Liang

Old Dominion University - Finance ( email )

Norfolk, VA 23529-0222
United States

Mohammad Najand

Old Dominion University - Finance ( email )

School of Business and Public Administration
Norfolk, VA 23529-0222
United States
757-683-3509 (Phone)
757-683-5639 (Fax)

David D. Selover

Old Dominion University - Economics Department ( email )

Norfolk, VA 23529
United States
757-683-3541 (Phone)

Licheng Sun (Contact Author)

Old Dominion University ( email )

Strome College of Business
Department of Finance
Norfolk, VA 23529-0222
United States

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