TY - JOUR
T1 - March Market Madness
T2 - The Impact of Value-Irrelevant Events on the Market Pricing of Earnings News
AU - Drake, Michael S.
AU - Gee, Kurt H.
AU - Thornock, Jacob R.
N1 - Publisher Copyright:
© 2016 The Canadian Academic Accounting Association.
PY - 2016/3/1
Y1 - 2016/3/1
N2 - Each year, the NCAA basketball tournament (March Madness) is a daytime distraction for millions of people, providing a largely exogenous shock to investor attention. We investigate whether March Madness influences the market response to earnings by diverting investor attention away from earnings news. We find that the price reaction to earnings news released during March Madness is muted. This result generally holds across several samples and additional analyses. We also find that the result is more muted for low institutional ownership firms, consistent with the effect being driven by less-sophisticated investors. Furthermore, we find that it takes the market 30 to 60 days to correct for the distraction effect. Overall, we provide a unique test of the theory of limited attention by documenting that extraneous events can have a significant impact on the pricing of earnings.
AB - Each year, the NCAA basketball tournament (March Madness) is a daytime distraction for millions of people, providing a largely exogenous shock to investor attention. We investigate whether March Madness influences the market response to earnings by diverting investor attention away from earnings news. We find that the price reaction to earnings news released during March Madness is muted. This result generally holds across several samples and additional analyses. We also find that the result is more muted for low institutional ownership firms, consistent with the effect being driven by less-sophisticated investors. Furthermore, we find that it takes the market 30 to 60 days to correct for the distraction effect. Overall, we provide a unique test of the theory of limited attention by documenting that extraneous events can have a significant impact on the pricing of earnings.
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U2 - 10.1111/1911-3846.12149
DO - 10.1111/1911-3846.12149
M3 - Article
AN - SCOPUS:84937796659
SN - 0823-9150
VL - 33
SP - 172
EP - 203
JO - Contemporary Accounting Research
JF - Contemporary Accounting Research
IS - 1
ER -