Religious holidays,investor distraction,and earnings announcement effects |
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Institution: | 1. ESSEC Business School, 3, avenue Bernard Hirsch, 95021 Cergy-Pontoise, France;2. Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, ON M5S 3E6, Canada |
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Abstract: | We examine price reactions to U.S. firms’ earnings announcements during Easter week in order to analyze whether and how the religious holiday calendar impacts investors’ information processing. We find that there is an asymmetric pattern of immediate and delayed responses to earnings surprises experienced during Easter, entailing similar immediate reactions to both good and bad news and a stronger delayed response to bad news. Moreover, local religious characteristics affect investor’s response to firm news. The results are consistent with a religion-induced distraction effect on investors’ information processing ability. We also show that this effect can form the basis for a profitable trading strategy. The findings highlight the importance of religion for firms’ information environment and for the local component of stock prices. |
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Keywords: | Investor distraction Post-earnings announcement drift Religion |
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