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 language | English |
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Pages (from-to) | 1327-1344 |
Journal | European Journal of Finance |
Volume | 30 |
Issue number | 12 |
Early online date | 29 Jan 2024 |
DOIs | |
Publication status | Published - 2024 |
Keywords / Materials (for Non-textual outputs)
- sleep deprivation
- market reactions
- daylight saving time
- earnings surprise