Concurrent Earnings Announcements and the Allocation of Investor Attention

Abstract

We study how investors allocate attention between firm-specific and aggregate information in earnings announcements. We hypothesize that as the number of firms announcing earnings on a given day increases, so too does the net benefit of processing aggregate rather than idiosyncratic information in earnings announcements. Consistent with this prediction, we show that aggregate uncertainty declines on days with more earnings announcements, while simultaneously the idiosyncratic uncertainty of announcing firms increases. We further show that investor behavior reflects such an attention allocation: on days with many firms announcing earnings, investors adjust their portfolio by trading securities with higher exposure to aggregate uncertainty, and they perform more Internet searches for macro-related terms. Overall, the evidence is consistent with predictions from recent information choice models and indicates that investors rationally allocate their limited attention between different types of information.