Sleep Disruption and Retail Investor Trading

We hypothesize that later sunsets and clock changes disrupt sleep, impairing investor’s information processing and trading performance. Using geographic and seasonal sunset differences and daylight saving time transitions, we find that later sunset predicts lower abnormal returns on retail trades. Later sunset is also associated with weaker trading responses to earnings announcements and stronger tilts against earnings surprises. Later sunset is more negatively associated with performance for announcement-stock trades than for other trades. Together, these findings indicate that environmental factors influence the information processing and trading outcomes of investors.