Attention-driven reaction to extreme earnings surprises
QUARTERLY REVIEW OF ECONOMICS AND FINANCE(2023)
摘要
We investigate the relationship between investor attention and stock returns in the context of extreme earnings surprises. We propose a novel mechanism that describes this interaction: high attention to very positive and very negative earnings news results in faster incorporation of information into stock prices, an overreaction effect, and a subsequent partial reversal. We test this mechanism using post-announcement abnormal returns and measure investor attention using internet search volume. We confirm that abnormal attention to earnings announcements is positively related to post-announcement abnormal returns when earnings surprises are very positive and negatively related when earnings surprises are very negative. More importantly, we argue that investors exhibit attention-driven overreactions to these extreme earnings surprises since the initial effects of abnormal attention on abnormal returns are subsequently partially reversed.
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关键词
Limited attention,Market-pricing anomaly,Stock prices explanation,Earnings announcements,Event study
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