The effect of the summer doldrums on earnings announcement returns and ERC's

Conventional wisdom, as well as recent research (Hong and Yu 2009), suggest that trading activity and returns decrease during the summer months, possibly due to decreased market participation by net-buying noise traders. I extend previous research by specifically testing for differences in returns in the period surrounding both summer and non-summer earnings announcements. I document lower abnormal returns surrounding summer earnings announcements compared to non-summer announcements. My results suggest that this difference in abnormal returns is greater in the online-trading period—an era characterized by increased noise trading. However, I do not find this difference between summer and non-summer announcement-period returns to be related to a firm's analyst following, market-to-book ratio, or the summer vs. non-summer difference in a firm's announcement-period trading volume. In addition, I do not find evidence that the summer vs. non-summer difference in announcement-period returns is affected by the level of unexpected earnings revealed in the earnings announcement.