Investor inattention and friday earnings announcements

Stefano Dellavigna, Joshua M. Pollet

Research output: Contribution to journalArticlepeer-review

Abstract

Does limited attention among investors affect stock returns? We compare the response to earnings announcements on Friday, when investor inattention is more likely, to the response on other weekdays. If inattention influences stock prices, we should observe less immediate response and more drift for Friday announcements. Indeed, Friday announcements have a 15% lower immediate response and a 70% higher delayed response. A portfolio investing in differential Friday drift earns substantial abnormal returns. In addition, trading volume is 8% lower around Friday announcements. These findings support explanations of post-earnings announcement drift based on underreaction to information caused by limited attention.

Original languageEnglish (US)
Pages (from-to)709-749
Number of pages41
JournalJournal of Finance
Volume64
Issue number2
DOIs
StatePublished - Apr 2009
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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