Watching popular late-night TV shows on streaming services like Netflix and Amazon can have unexpected financial consequences: research has found a significant drop in market returns the day after popular shows are released at midnight. New work by researchers Arbab Chima, Arman Eshraghi, Raghavendra Rau, and Qingwei Wang, whose findings are presented in the Financial Times, offers a fresh perspective on how trader fatigue, caused by voluntary sleep deprivation, can affect stock prices. This is reported by UNN.
Details
The popularity of streaming services and their practice of "binge-releasing" new seasons at midnight has led to a proliferation of late-night movie marathons. Researchers suggested that such fatigue among users who stayed up to watch TV series could be noticeable in pricing during the next trading session.
Unlike the previously studied "daylight saving time anomaly," which is controversial, watching TV until dawn is likely to exhaust users more.
Key findings
Researchers found that market returns decline on days following the release of popular late-night shows.
On average, the S&P 500 index falls by approximately 0.25% the day after such releases. The cumulative annual decline in market returns is about 2.3%, based on the release of an average of 10 popular shows each year.
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The study reveals that stocks with larger market capitalization and higher institutional ownership are most affected, which contradicts the findings of previous work on trader fatigue, which pointed to small companies.
We found cross-sectional variation in the impact of sleep deprivation, which suggests that experienced institutional investors are susceptible to the new cultural trend of late-night TV viewing, which affects their cognitive abilities.
They suggest that the asymmetric allocation of cognitive resources by sleep-deprived investors for making buy and sell decisions explains the lower returns.