The relationship between media coverage and post-earnings announcement drift

Sammanfattning: We investigate empirically if there is a connection between media coverage and post- earnings announcement drift. We test and find support for both our hypotheses; media coverage is positively associated with both earnings surprises and the drift following earnings announcements. We argue that our results can be attributed to limited investor attention. As attention is a scarce resource for investors, and media has been shown to act as an attention-grabber, media coverage might create more homogenous expectations and in turn less accurate earnings estimates. Moreover, we suggest that media's ability to drive price reactions in the context of post-earnings announcement drift can cause an amplified drift.