Memory moves markets

Charles, Constantin ORCID: 0009-0009-2110-1664 (2024) Memory moves markets. Review of Financial Studies. ISSN 0893-9454

Text (hhae086) - Published Version Available under License Creative Commons Attribution. Download (988kB)

Abstract

I show that memory-induced attention can distort prices in financial markets. I exploit rigid earnings announcement schedules to identify which firms are associated in investors’ memory. Firms with randomly overlapping earnings announcements are associated in memory because many investors experience them in the same context. Months later, when only one of the two firms announces earnings, this context is cued, and triggers the recall of the other, associated firm. On such days, I find that memory-induced attention leads to buying pressure in the associated firm’s stock. The strength of this effect varies as predicted by associative memory theory.

Item Type:	Article
Additional Information:	© 2024 The Author
Divisions:	Finance
Subjects:	H Social Sciences > HG Finance H Social Sciences > HB Economic Theory
JEL classification:	G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
Date Deposited:	27 Sep 2024 11:42
Last Modified:	16 Jan 2025 10:21
URI:	http://eprints.lse.ac.uk/id/eprint/125551

Actions (login required)

View Item