The friday-effect and investor attention during covid-19 crisis
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School of Business |
Master's thesis
Authors
Date
2024
Department
Major/Subject
Mcode
Degree programme
Finance
Language
en
Pages
55 + 5
Series
Abstract
Market efficiency is a widely researched topic in finance and one way to approach the subject is to observe investor attention to firm announcements. Smaller reactions at certain times have been observed and characterized as underreactions due to investor inattention. Prior studies point that investors have limited attention and distractions such as macro events and certain weekdays affect the trading volumes and market reactions to announcements. In this thesis we focus on the market reactions to firm announcements and observe if there are signs of investor inattention to announcements made on Fridays and during different phases of Covid-19 pandemic. We limit our sample to the Nordic countries of Finland, Sweden, Denmark, and Norway from 2013-2023. We examine the phenomenon with five different announcement types: earnings, dividend, merger, share repurchase and seasoned equity offering. To find out if there is a bias with Friday announcements producing different market reactions compared to announcements on other days, we also study if the companies making Friday announcements are inherently different by following their market reactions caused by announcements and comparing their firm characteristics to the companies which do not make Friday announcements. Our results indicate that the market reactions on Fridays for earnings announcements are larger than on other days which is the opposite to prior literature. Market reactions to dividend announcements made by companies making announcements on Fridays are smaller on each day of the week. Otherwise there does not appear to be significant differences between Friday announcements and non-Friday announcements nor between Friday announcers and non-Friday announcers. Friday announcers and non-Friday announcers do not have consistently different firm characteristics across the different announcement types. We do not find consistent evidence of decreased investor attention during different phases of the Covid pandemic, and on contrary, the results appear to show more signs of increased attention during the pandemic.Description
Thesis advisor
Nyberg, PeterKeywords
investor attention, inattention, friday-effect, covid-19