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Religious holidays, investor distraction, and earnings announcement effects

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  • Pantzalis, Christos
  • Ucar, Erdem

Abstract

We examine price reactions to U.S. firms’ earnings announcements during Easter week in order to analyze whether and how the religious holiday calendar impacts investors’ information processing. We find that there is an asymmetric pattern of immediate and delayed responses to earnings surprises experienced during Easter, entailing similar immediate reactions to both good and bad news and a stronger delayed response to bad news. Moreover, local religious characteristics affect investor’s response to firm news. The results are consistent with a religion-induced distraction effect on investors’ information processing ability. We also show that this effect can form the basis for a profitable trading strategy. The findings highlight the importance of religion for firms’ information environment and for the local component of stock prices.

Suggested Citation

  • Pantzalis, Christos & Ucar, Erdem, 2014. "Religious holidays, investor distraction, and earnings announcement effects," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 102-117.
    • Handle: RePEc:eee:jbfina:v:47:y:2014:i:c:p:102-117
    DOI: 10.1016/j.jbankfin.2014.05.020
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    More about this item

    Keywords

    Investor distraction; Post-earnings announcement drift; Religion;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G19 - Financial Economics - - General Financial Markets - - - Other

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