Investor Inattention and the Market Impact of Summary Statistics

Thomas Gilbert (), Shimon Kogan (), Lars Lochstoer () and Ataman Ozyildirim
Additional contact information
Thomas Gilbert: Foster School of Business, University of Washington, Seattle, Washington 98195
Shimon Kogan: McCombs School of Business, University of Texas at Austin, Austin, Texas 78712
Lars Lochstoer: Graduate School of Business, Columbia University, New York, New York 10027

Management Science, 2012, vol. 58, issue 2, 336-350

Abstract: We show that U.S. stock and Treasury futures prices respond sharply to recurring stale information releases. In particular, we identify a unique macroeconomic series--the U.S. Leading Economic Index ® (LEI)--which is released monthly and constructed as a summary statistic of previously released inputs. We show that a front-running strategy that trades S&P 500 futures in the direction of the announcement a day before its release and then trades in the opposite direction of the announcement following its release generates an average annual return of close to 8%. These patterns are more pronounced for high beta stocks, for stocks that are more difficult to arbitrage, and during times when investors' sensitivity to firm-specific stale information is high. Treasury futures exhibit similar, albeit less pronounced, price patterns. Other measures of information arrival, such as price volatility and volume, spike following the release. These empirical findings suggest that some investors are inattentive to the stale nature of the information included in the LEI releases, instead interpreting it as new information, and thereby causing temporary yet significant mispricing. This paper was accepted by Brad Barber, Teck Ho, and Terrance Odean, special issue editors.

Keywords: capital markets; stale macroeconomic information; investor inattention (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.1110.1475 (application/pdf)

Related works:
Working Paper: Investor Inattention and the Market Impact of Summary Statistics (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:58:y:2012:i:2:p:336-350

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().