Attention to Market Information and Underreaction to Earnings on Market Moving Days

Kottimukkalur, Badrinath

doi:10.2139/ssrn.3133193

Cited by 1 publication

(6 citation statements)

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“…In recent years, the limited attention theory draws academic attention and is proved to be useful in explaining the existence of PEAD. What is more, Kottimukkalur (2019) finds a "market movement effect"---PEAD is stronger in firms that release earnings on days when market returns are higher in magnitude---which is consistent with attention-constrained investors being distracted by market swings and missing firm-specific information announced.…”

Section: Introductionmentioning

confidence: 58%

“…The third type relates to the "market movement effect" proposed by Kottimukkalur (2019). His idea is that PEAD would be stronger for firms releasing earnings on a day when the market return is relatively higher in magnitude.…”

Section: The Limited Attention Explanation For Earnings Announcement Anomaly Compared With Alternative Explanationsmentioning

confidence: 99%

“…This paper uses a random-walk model to measure earnings surprise as this model can mitigate the problem of incomprehension and untimeliness common in analyst forecasts on China's market. To compare the earnings surprises of different stocks on the same basis, each stock's theoretical earnings surprise outcome will be standardized following the standardization method proposed by Kottimukkalur (2019).…”

Section: Standard Earnings Surprise Groups (S_rank)mentioning

confidence: 99%

“…Window 2 relies on trading days in the last quarter. This second method is used in Kottimukkalur (2019). For example, the absolute market returns on 2019 April, 18 will be compared with a sequence of values over the period from 2019 January, 01 to 2019 March, 31.…”

Section: Market Movement Groups (Mm_rank)mentioning

confidence: 99%

“…Following the perspective of Kottimukkalur (2019), we attempt to attribute PEAD in China to China's large market movement This Journal is licensed under a Creative Commons Attribution 4.0 International License events, hence providing further evidence of the explanatory power of limited attention. Specifically, we examine the relationship between this so-called "market movement effect" explanation and other alternative explanations for PEAD based on nonmarket event effects, such as the "Friday effect" (DellaVigna and Pollet, 2009), "announcement concentration effect" (Hirshleifer et al, 2009), and "ostrich effect" (Hou et al, 2009).…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Limited Attention and Post-Earnings Announcement Drift: Evidence From China’s Stock Market

Chen

Gao

Liu

2021

IJEFI

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This paper utilizes Chinese stock data to provide further evidence on the power of limited attention theory in explaining post-earnings announcement drift. As retail investors prevail in China and they are easily distracted by market swings, we should expect severe attention problems, resulting in larger underreaction to firm information and higher sensitivity to market movement, i.e., the so-called "market movement effect". After accounting for special arrangements such as preannouncements and earnings previews, we confirm a strong presence of this effect in Chinese stock market, given the "Friday effect" and "announcement concentration effect" being controlled for. Moreover, the effect is asymmetric in market up and down, and becomes more pronounced for small-cap and value stocks.

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Section: Introductionmentioning

confidence: 58%

Section: The Limited Attention Explanation For Earnings Announcement Anomaly Compared With Alternative Explanationsmentioning

confidence: 99%

Section: Standard Earnings Surprise Groups (S_rank)mentioning

confidence: 99%

Section: Market Movement Groups (Mm_rank)mentioning

confidence: 99%