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Sophisticated Investor Attention and Market Reaction to Earnings Announcements: Evidence From the SEC’s EDGAR Log Files

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  • Ruihai Li
  • Xuewu (Wesley) Wang
  • Zhipeng Yan
  • Yan Zhao

Abstract

The Securities and Exchange Commission’s (SEC) Electronic Data Gathering and Retrieval (EDGAR) log files provide a direct, powerful measure of attention from relatively sophisticated investors. The authors apply this measure to a sample of earnings announcements from 2003 to 2016. The authors find that the stock market is less surprised, and the post–earnings-announcement drift is weaker for earnings announcements receiving more preannouncement investor attention, measured in downloads by humans from EDGAR. The authors further show that it is profitable to utilize the different drift patterns. An attention-based portfolio without the SEC reporting lag that longs stocks with the lowest investor attention and most positive earnings surprises and shorts stocks with the lowest attention and most negative earnings surprises generates a statistically significant monthly alpha of 1.24% after adjusting for standard asset pricing factors.

Suggested Citation

  • Ruihai Li & Xuewu (Wesley) Wang & Zhipeng Yan & Yan Zhao, 2019. "Sophisticated Investor Attention and Market Reaction to Earnings Announcements: Evidence From the SEC’s EDGAR Log Files," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 20(4), pages 490-503, October.
    • Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:4:p:490-503
    DOI: 10.1080/15427560.2019.1575829
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    Cited by:

    1. Ma, Rui & Marshall, Ben R. & Nguyen, Hung T. & Nguyen, Nhut H. & Visaltanachoti, Nuttawat, 2022. "Climate events and return comovement," Journal of Financial Markets, Elsevier, vol. 61(C).
    2. Bozok, İhsan & Özyıldırım, Süheyla, 2022. "Firm centrality and limited attention," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 483-500.
    3. Goodell, John W. & Kumar, Satish & Li, Xiao & Pattnaik, Debidutta & Sharma, Anuj, 2022. "Foundations and research clusters in investor attention: Evidence from bibliometric and topic modelling analysis," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 511-529.
    4. Josef Fink, 2020. "A Review of the Post-Earnings-Announcement Drift," Working Paper Series, Social and Economic Sciences 2020-04, Faculty of Social and Economic Sciences, Karl-Franzens-University Graz.
    5. Fink, Josef, 2021. "A review of the Post-Earnings-Announcement Drift," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    6. Ahmad, Fawad & Oriani, Raffaele, 2022. "Investor attention, information acquisition, and value premium: A mispricing perspective," International Review of Financial Analysis, Elsevier, vol. 79(C).

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