Cornell Study Finds Investors' Limitations Affect Hospitality Stock Prices

Nov 14, 2013

Contact:  Jane Henion, 607.254.8987,

Cornell Study Finds Investors' Limitations Affect Hospitality Stock Prices

Ithaca, NY, November 14, 2013 - When it comes to how stock prices react to new information, it isn't just what you say, but when you say it. According to a new study published by the Cornell Center for Hospitality Research (CHR), the phenomenon of post earnings stock price drift seems to be related to the limits of the human attention span. The study, "Can You Hear Me Now? Earnings Surprises and Investor Distraction in the Hospitality Industry," by Pamela C. Moulton, finds that news about a particular stock can be lost in the crush of earnings announcements at the end of each quarter, with the result that prices don't always reflect the news. The study is available at no charge from the CHR at

"When a company has an earnings surprise, you'd expect the stock price to react immediately, but that does not always happen," explains Moulton, an assistant professor of finance at the Cornell School of Hotel Administration. "Instead, there is often a muted price reaction to earnings surprises, and then the price catches up to the news over time. This stock price drift clearly is related to the fact that the huge number of announcements in earnings season is more information than most investors can handle at one time."

For her analysis, Moulton analyzed the stock price behavior of 165 publicly traded hospitality firms over a ten-year period. The study included 90 restaurant companies, 39 hotel firms, 22 airlines, and 14 amusement parks and recreation operators. Based on this analysis, the study shows that hospitality stocks clearly experience price drift, especially after busy announcement days. Her conclusion is that the market's usual efficiency is slowed by humans' slow response to a heavy information load. However, the investors do catch up and prices eventually reflect the earnings news.

One implication is that hospitality investors who are "late to the party" by not making a move on the earnings announcement day can still anticipate further price changes as the stock price moves to its fair value. Similarly, hospitality firms that seek to "hide" earnings surprises might choose a busy day to make their announcement.

About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 76 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. To learn more about the center and its projects, visit

Center Senior Partners: Accenture, ASAE Foundation, Carlson Rezidor Hotel Group, Hilton Worldwide, National Restaurant Association, SAS, STR, and Taj Hotels Resorts and Palaces
Center Partners: Davis & Gilbert LLP, Deloitte & Touche USA LLP, Denihan Hospitality Group, Duetto, Expedia, Inc., Forbes Travel Guide, Four Seasons Hotels and Resorts, Fox Rothschild LLP, Host Hotels & Resorts, Inc., Hyatt Hotels Corporation, Intel Corporation, InterContinental Hotels Group, Jumeirah Group, LRP Publications, Maritz, Marriott International, Inc., Marsh's Hospitality Practice, McDonald's USA,, PricewaterhouseCoopers, Proskauer, ReviewPro, Revinate, Sabre Hospitality Solutions, Sathguru Management Consultants (P) Ltd., Schneider Electric, Travelport, TripAdvisor, and Wyndham Hotel Group

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