The “market efficiency” models of finance cannot fully explain stock prices. A robust violation of market efficiency is stock prices’ underreaction to earnings news. One argument for such violation is that information experts such as (sell-side) analysts, whose revealed knowledge structure (such as earnings forecasts) investors significantly rely on to evaluate stocks, fail to process earnings news. To understand such experts’ failure and consequent market inefficiency, we take a new institutionalism approach and examine the context-bound attention of the analysts. Specifically, we examine the attention-limiting role of competing tasks and distracting events in influencing analysts’ earnings forecasts for firms. Using a sample of 5,136 North American public firms and 10,798 analysts over 2000-2012, we find that competing tasks worsen analysts’ earnings forecast accuracy. Also, the number of competing tasks is significantly associated with stock prices’ underreaction to earnings news. Hence, stock price is...