Research On The Earning Announcement Effect In China Stock Markets Based On Limited Investor Attention

According to classic finance theories, the stock market is totallyefficient. All information will be digested by the market in munities. Itmeans that nobody can get extra profit through holding any informationand applying transaction. But the behavioral finance theories found thatthe investors’ attention is limited, which means if they pay attentionto something they have to lose attention to something else. From theinvestors’ perspective, listed companies’ disclosure of information isone of their major focus, which contains monthly reports, quarterlyreports, annual reports and earning warnings. Take annual reports forexample, one same principle for most markets is, all listed companiesshould booking a certain date for the annual reports’ releasing in acertain period. In Chinese market, most companies chose to release theirannual reports from the end of March to the end of April. This easilycaused the uneven distribution of the releasing dates. In2013, on theleast released day, only1company released its report, and to the most,there are98companies’ released their reports. And the median is15.Under today’s information explosion, the investors are facing amarket with large amounts of information in it. So, when there are toomany companies release their reports in a single day, nor a specificreport can get enough attention. So that the information in its reportcannot be reflected on the stock price in time but can in a long timeafter the releasing. This is called earnings announcement effect. Basedon this hypothesis, we studied a lot of research outcomes of formerresearchers. We also did some comparison before we determine our researchmethod, in which we chose annual reports as a measure, did regressionanalysis with and without control varies. And our data pool is fromShanghai stock exchange A section share and Shenzhen stock exchange Asection share. Ultimately, we confirmed the earnings announcementeffect’s existent in the market of China and concluded its features.With the inspection result, the paper gives some advice for the marketsupervisor to improve it and for the investors, too.