Stockholders' Unrealized Returns and the Market Reaction to Financial Disclosures

• 成果类型: Article
• 署名作者: Weisbrod, Eric
• 署名单位: University of Miami
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12743
• 发表日期: 2019
• 页码: 899-942
• 关键词: PROSPECT-THEORY; trading volume; Behavioral biases; earnings; disposition; investors; winners; losers; size; overconfidence

摘要

Using both investor- and stock-level data, I examine the relation between stockholders' unrealized returns since purchase and the market response to earnings announcements. I demonstrate that stockholders' unrealized gain/loss position moderates their trading behavior in response to earnings announcements. I also find that this behavior generates a short-window return underreaction to earnings news. My results are generally consistent with predictions from prospect theory regarding the manner in which stockholders' unrealized returns moderate their trading response to belief shocks. However, my results also suggest that an emotional component (i.e., regret-avoidance/pride-seeking) is necessary to explain the observed investor behavior.