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Driven to Distraction: Extraneous Events and Underreaction to Earnings News Author info | Abstract | Publisher info | Download info | Related research | Statistics DAVID HIRSHLEIFER
SONYA SEONGYEON LIM
SIEW HONG TEOH
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Recent studies propose that limited investor attention causes market underreactions. This paper directly tests this explanation by measuring the information load faced by investors. The "investor distraction hypothesis" holds that extraneous news inhibits market reactions to relevant news. We find that the immediate price and volume reaction to a firm's earnings surprise is much weaker, and post-announcement drift much stronger, when a greater number of same-day earnings announcements are made by other firms. We evaluate the economic importance of distraction effects through a trading strategy, which yields substantial alphas. Industry-unrelated news and large earnings surprises have a stronger distracting effect. Copyright (c) 2009 the American Finance Association.
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Article provided by American Finance Association in its journal The Journal of Finance .
Volume (Year): 64 (2009)
Issue (Month): 5 (October)
Pages: 2289-2325
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Handle: RePEc:bla:jfinan:v:64:y:2009:i:5:p:2289-2325Contact details of provider: Web page: http://www.afajof.org/ More information through EDIRC
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"Information Salience, Investor Sentiment, and Stock Returns: The Case of British Soccer Betting ,"
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