This paper shows investors' lottery preference can attenuate price underreaction to extreme good earnings news. Such news reaffirms investors' preference for stocks with strong ex ante lottery-like features, thereby accelerating price adjustments. We find that PEAD attenuates for stocks with...

We explore the possibility that overnight returns can serve as a measure of firm-specific investor sentiment by analyzing whether they exhibit characteristics expected of a sentiment measure. First, we document short-term persistence in overnight returns, consistent with existing evidence of...

Prior studies use fundamental earnings forecasts to proxy for the market's expectations of earnings because analyst forecasts are biased and are available for only a subset of firms. We find that as a proxy for market expectations, fundamental forecasts contain systematic measurement errors...

We predict and find that short-selling constraints combined with investor disagreement cause prices to respond more strongly to bad earnings news than to good earnings news, an asymmetry characterized by Skinner and Sloan as the “torpedo effect.” However, in the absence of short-sales...

This study investigates individual and institutional trading activities in competing firms to infer informed trading. We find evidence for individual and institutional informed trading in competing firms around earnings announcements. The evidence is stronger prior to announcements than after...

Holding earnings surprise constant, investors react negatively to late earnings announcements. One standard deviation of announcement delay (about 5 days) corresponds to 23 bps lower abnormal returns over a two-day announcement window. We show that the results are robust to further controlling...

We examine the role of institutional investors underlying post-earnings-announcement drift (PEAD). Our results show that while institutional investors generally herd on earnings news, such correlated trading among institutions does not eliminate or reduce market underreaction to earnings...