Belief diversity and price informativeness around earnings announcements

The consequences of price informativeness have been extensively studied in the past. In contrast, this study goes a step backward to explore its determinants by examining whether belief diversity facilitates a complete and timely reflection of earnings news into prices. Using a global dataset, we find a higher abnormal return variance ratio (lower post-earnings announcement drift) in the presence of more diversely-informed beliefs among traders. This inference holds despite several robustness checks. Moreover, the cross-country analysis reveals that the documented impact of belief diversity intensifies in countries with higher market development, greater corporate transparency, and stronger investor protection. (c) 2022 Elsevier Inc. All rights reserved.