Local investor attention and post-earnings announcement drift

• DOI: 10.1007/s11156-017-0669-2
• Publication Date: 2017-09-18T08:08:22Z
• Authors: Bin Wang; Wonseok Choi; Ibrahim Siraj
• Keywords: Finance and Financial Management; 0502 economics and business; 05 social sciences; Business

We show that local investor attention, as a proxy for the arrival rate of informed trading, has an impact on post-earnings announcement drift. Measured by monthly abnormal Google search volume before the earnings announcement, high (low) local investor attention is associated with weak (strong) delayed market reaction to the earnings announcement and strong (weak) abnormal trading volume in the pre-earnings announcement period. The evidence documented in this paper supports both “rational structural uncertainty” and attention allocation theories that argue that information distribution among investors plays an important role in explaining market anomalies.