Investor inattention around stock market holidays

We observe three results that lead to the conclusion investors are distracted by holidays. First, there is a substantial reduction in the trading volume adjacent to weekday stock market closings. Second, there are considerably fewer stocks with extreme abnormal returns in the trading days adjacent to a holiday. Third, those stocks with extreme abnormal returns in the trading days adjacent to a holiday drift on the subsequent trading day. These findings do not hold for weekend stock market closings. The evidence supports the hypothesis of inattentive investors, whose reactions are suppressed in the quiet trading sessions surrounding stock market holidays.