Limited attention and the earnings announcement returns of past stock market winners
By David Aboody, Reuven Lehavy, Brett Trueman. 2010
153 citations recorded by the source corpus.
We document that stocks with the strongest prior 12-month returns experience a significant average market-adjusted return of 1.58% during the five trading days before their earnings announcements and a significant average market-adjusted return of −1.86% in the five trading days afterward. These returns remain significant even after accounting for transactions costs. We empirically test a limited attention explanation for these anomalous returns—that stocks with sharp run-ups tend to attract individual investors’ attention and investment dollars, particularly before their earnings announcements. Our analysis suggests that the trading decisions of individual investors are at least partly responsible for the return pattern that we observe.
Subfields: Accounting, Finance
View Paper: https://www.semanticscholar.org/paper/3d5dc15aea9f28f8ba2c7edbc175d82d6eaf01a2
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Citations in the corpus
- Retail investor attention and stock price crash risk: Evidence from China (2019, background): “Recently, more and more studies find that limited attention of retail investors not only limits their learning and decision-making process but also affects their trading behavior (Hong and Stein, 1999; Pashler et al., 2001; Statman et al., 2006; Aboody et al., 2010).”
- Do sell-side analysts exhibit differential target price forecasting ability? (2012, unknown): “…for US firms by identifiable analysts spanning the calendar years 2000 through 2009, which meet certain criteria.18 First, they must be 12-month- 16 Aboody et al. (2010) argue that strong prior returns heighten small investors’ demands immediately before earnings announcements, leading to…”