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

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
Pages (from-to)1327-1344
JournalEuropean Journal of Finance
Volume30
Issue number12
Early online date29 Jan 2024
DOIs
Publication statusPublished - 2024

Keywords / Materials (for Non-textual outputs)

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

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