Let me sleep on it: Sleep and investor reactions to earnings surprises

Angelica Gonzalez, Xuhao Li*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

We explore if sleep deprivation affects how investors react to relevant news. Using the transition to Daylight Saving Time (DST) in spring as a disruption to sleeping patterns, we show that investors underreact to a firm’s earnings surprise in the days after the transition to DST. Further, an earnings surprise in the days after the transition to DST is associated with a positive drift in the post-announcement period. Our findings are consistent with sleep-deprived investors mispricing and subsequently revisiting relevant information. Overall, our results highlight the importance of investors’ cognitive ability for efficient market pricing.

Original languageEnglish
JournalEuropean Journal of Finance
Early online date29 Jan 2024
DOIs
Publication statusE-pub ahead of print - 29 Jan 2024

Keywords / Materials (for Non-textual outputs)

  • sleep deprivation
  • market reactions
  • daylight saving time
  • earnings surprise

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