Investor Attention and the Pricing of Earnings News PDF Download
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Author: Asher Curtis
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
We investigate whether investor attention is associated with the pricing (and mispricing) of earnings news where investor attention is measured using social media activity. We find that high levels of investor attention are associated with greater sensitivity of earnings announcement returns to earnings surprises, with the effect being strongest for firms that beat analysts' forecasts. This appears to be appropriate pricing, on average, as only firms with low levels of attention are associated with significant post-earnings-announcement drift. Our results are distinct from other information sources including traditional media outlets, financial blogs, and internet search engine activity. Our results are consistent with investor attention observed in social media activity having distinct effects on the pricing and mispricing of earnings news.
Author: Asher Curtis
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
We investigate whether investor attention is associated with the pricing (and mispricing) of earnings news where investor attention is measured using social media activity. We find that high levels of investor attention are associated with greater sensitivity of earnings announcement returns to earnings surprises, with the effect being strongest for firms that beat analysts' forecasts. This appears to be appropriate pricing, on average, as only firms with low levels of attention are associated with significant post-earnings-announcement drift. Our results are distinct from other information sources including traditional media outlets, financial blogs, and internet search engine activity. Our results are consistent with investor attention observed in social media activity having distinct effects on the pricing and mispricing of earnings news.
Author: Kimball Chapman
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
This paper provides new evidence that investor attention explains positive returns around earnings announcements and reconciles the attention explanation with information-based explanations in the literature. I use earnings notifications, which are attention-grabbing announcements of the upcoming earnings date but otherwise provide little new information. I find positive returns, more EDGAR searches, and higher trading volumes on notification days. I also find that attention and returns around the earnings announcement are lower in the presence of notifications, consistent with notifications attenuating investor attention. I show that attention has its strongest effect on returns in the days immediately following the earnings announcement.
Author: Kimball Chapman
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper explores the extent to which limited investor attention explains positive average stock returns around earnings announcements. I observe positive abnormal returns on days when firms announce the date earnings will be released (earnings notification days) and lower returns around earnings announcements when firms begin providing earnings notifications. I find a similar effect for other highly-visible news events occurring soon before earnings announcements and higher returns around earnings announcements and when retail investors are more actively acquiring information about the firm. My results suggest that the attention-grabbing effect of earnings announcements provides a partial explanation of positive average returns around earnings announcements.
Author: Alastair Lawrence
Publisher:
ISBN:
Category :
Languages : en
Pages : 43
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Book Description
This study presents a field experiment we conducted in which media articles for a random sample of firms with earnings announcements are promoted to a one percent subset of Yahoo Finance users. The promoted firms have similar fundamental and earnings-news characteristics as control firms, yet we find that promoted firms have higher abnormal returns on the day of the earnings announcement, and some evidence of lower bid-ask spreads. Moreover, these results are more pronounced for less visible firms, negative earnings news, and on days with fewer promoted firms. We do not find evidence of significant increases in trading volume, or of information acquisition by users subject to the promotion. These findings suggest that investor attention affects the pricing of earnings and that retail investors buy stocks that catch their attention, in a setting where attention is randomly assigned.
Author: Linda H. Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
We show evidence that consistent with category-learning behavior, investors allocate more attention to macroeconomic news than to firm-specific news, such as earnings announcements. Despite the distracting effect of macroeconomic news on investor attention, we find that earnings announcements with concurrent macroeconomic news announcements actually have significantly stronger immediate market response and weaker post-earnings announcement drift. We hypothesize that the combined total attention to macroeconomic news and earnings announcements helps investors understand both the systematic and firm-specific components of earnings surprises. Consistent with the hypothesis, our results show that the macroeconomic news effect is mainly driven by firms with high exposure to macroeconomic news. Moreover, we show that the effect is stronger when macroeconomic news contains more information and for firms with greater information uncertainty. Finally, we provide evidence that macroeconomic news helps reduce stock return uncertainty and enhance stock price efficiency.
Author: Kewei Hou
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
We examine the role of investor attention in explaining the profitability of price and earnings momentum strategies. Using trading volume and market state to measure cross-sectional and time-series variations of investor attention, we find that price momentum profits are higher among high volume stocks and in up markets, but that earnings momentum profits are higher among low volume stocks and in down markets. In the long run, price momentum profits reverse but earnings momentum profits do not. These results suggest that price underreaction to earnings news weakens with investor attention, but price continuation caused by investors' overreaction strengthens with attention.
Author: Joel Peress
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
Does investors' inattention contribute to the post-earnings announcement drift? I study this question using media coverage as a proxy for attention. I compare announcements made by the same firm in the same year and generating the same earnings surprise, when one announcement is covered in the Wall Street Journal while the other is not. I find that announcements with media coverage generate a stronger price and trading volume reaction at the time of the announcement and less subsequent drift. Moreover, this effect is less pronounced for more visible firms and on high-distraction days. These results are both economically and statistically strong. They lend support to the notion that limited attention is an important source of friction in financial markets.
Author: John Shon
Publisher: FT Press
ISBN: 0132615851
Category : Business & Economics
Languages : en
Pages : 225
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Book Description
Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples! Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies’ quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks–and, in some cases, conduct large sample tests–to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.
Author: Azi Ben-Rephael
Publisher:
ISBN:
Category :
Languages : en
Pages : 56
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Book Description
We propose a direct measure of abnormal institutional investor attention (AIA) using news searching and news reading activity for specific stocks on Bloomberg terminals. AIA is highly correlated with institutional trading measures and related to, but different from, other investor attention proxies. Contrasting AIA with retail attention measured using Google search activity, we find that institutional attention responds more quickly to major news events, leads retail attention, and facilitates permanent price adjustment. The well documented price drifts following both earnings announcements and analyst recommendation changes are driven by announcements where institutional investors fail to pay sufficient attention.
Author: Abdullah Kumas
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 174
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Book Description
This dissertation examines the relation between the volume of earnings disclosures by firms and aggregate stock market trading activity. Although the relation between the trading activity experienced by disclosing firms and announcement volume is negative, consistent with the firm level evidence of Hirschleifer et al. (2009a), the relations between number of announcements and both overall trading and non-announcer volume are positive. Hence, while it is true that high numbers of announcement distract investor attention within the set of announcing firms, it is also true that investor attention to the market as a whole (i.e., aggregate attention) increases with number of announcements. Results also show that the average aggregate surprise content of the announced earnings has a negative impact on overall volume. The strong positive relation between aggregate attention and number of announcements is mainly driven by large announcers. Finally, the arrival of a greater number of negative earnings surprises distracts investor attention from the announcers, and the aggregate market attention is equally attracted by positive and negative numbers of news.
