Time Zone Difference and Equity Market Price Efficiency Post‐Earnings Announcements

ABSTRACT This study investigates whether differences in investors' time zones affect stocks' price efficiency post‐earnings announcements on the Australian Securities Exchange. We examine how stocks heavily held by investors in a time zone significantly behind the exchange time zone respond to earnings announcements, compared to stocks that are not. This study finds that stocks associated with a later time zone are less price‐efficient post announcement. The pricing efficiency difference is pronounced for early announcements and announcements with a positive tone. Our results are robust to alternative price efficiency measures, post announcement time frames, and benchmark periods.