Limited Attention and Post-Earnings Announcement Drift: Evidence from China's Stock Market
This paper utilizes Chinese stock data to provide further evidence on the power of limited attention theory in explaining post-earnings announcement drift. As retail investors prevail in China and they are easily distracted by market swings, we should expect severe attention problems, resulting in...
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| Format: | Article |
| Language: | English |
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EconJournals
2021-01-01
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| Series: | International Journal of Economics and Financial Issues |
| Online Access: | https://www.econjournals.com/index.php/ijefi/article/view/10817 |
| _version_ | 1828020779713822720 |
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| author | Qian Chen Xiang Gao Gangchen Liu |
| author_facet | Qian Chen Xiang Gao Gangchen Liu |
| author_sort | Qian Chen |
| collection | DOAJ |
| description |
This paper utilizes Chinese stock data to provide further evidence on the power of limited attention theory in explaining post-earnings announcement drift. As retail investors prevail in China and they are easily distracted by market swings, we should expect severe attention problems, resulting in larger underreaction to firm information and higher sensitivity to market movement, i.e., the so-called “market movement effect”. After accounting for special arrangements such as preannouncements and earnings previews, we confirm a strong presence of this effect in Chinese stock market, given the “Friday effect” and “announcement concentration effect” being controlled for. Moreover, the effect is asymmetric in market up and down, and becomes more pronounced for small-cap and value stocks.
Keywords: Limited attention, earnings announcement, market movement, China's stock market, abnormal returns
JEL Classifications: C58, G14, G41
DOI: https://doi.org/10.32479/ijefi.10817
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| first_indexed | 2024-04-10T11:42:43Z |
| format | Article |
| id | doaj.art-3145d9b0a0874c3a87010c7d8cfee371 |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T11:42:43Z |
| publishDate | 2021-01-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-3145d9b0a0874c3a87010c7d8cfee3712023-02-15T16:17:28ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382021-01-01111Limited Attention and Post-Earnings Announcement Drift: Evidence from China's Stock MarketQian Chen0Xiang Gao1Gangchen Liu2Shenzhen Technology UniversityShanghai Business SchoolPeking University HSBC Business School This paper utilizes Chinese stock data to provide further evidence on the power of limited attention theory in explaining post-earnings announcement drift. As retail investors prevail in China and they are easily distracted by market swings, we should expect severe attention problems, resulting in larger underreaction to firm information and higher sensitivity to market movement, i.e., the so-called “market movement effect”. After accounting for special arrangements such as preannouncements and earnings previews, we confirm a strong presence of this effect in Chinese stock market, given the “Friday effect” and “announcement concentration effect” being controlled for. Moreover, the effect is asymmetric in market up and down, and becomes more pronounced for small-cap and value stocks. Keywords: Limited attention, earnings announcement, market movement, China's stock market, abnormal returns JEL Classifications: C58, G14, G41 DOI: https://doi.org/10.32479/ijefi.10817 https://www.econjournals.com/index.php/ijefi/article/view/10817 |
| spellingShingle | Qian Chen Xiang Gao Gangchen Liu Limited Attention and Post-Earnings Announcement Drift: Evidence from China's Stock Market International Journal of Economics and Financial Issues |
| title | Limited Attention and Post-Earnings Announcement Drift: Evidence from China's Stock Market |
| title_full | Limited Attention and Post-Earnings Announcement Drift: Evidence from China's Stock Market |
| title_fullStr | Limited Attention and Post-Earnings Announcement Drift: Evidence from China's Stock Market |
| title_full_unstemmed | Limited Attention and Post-Earnings Announcement Drift: Evidence from China's Stock Market |
| title_short | Limited Attention and Post-Earnings Announcement Drift: Evidence from China's Stock Market |
| title_sort | limited attention and post earnings announcement drift evidence from china s stock market |
| url | https://www.econjournals.com/index.php/ijefi/article/view/10817 |
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