Trading in Twilight: Sleep, Mental Alertness, and Stock Market Trading

We test whether mental alertness, as proxied by sleep disruption, impairs investor trading performance. Using four complementary approaches, we document that retail investors who experience a later sunset time on average earn lower abnormal returns on their trades. These approaches include panel regression with household fixed effects, RDD based on time zone borders, comparison of different seasons and latitudes, and daylight saving changes. Further tests suggest that the sleep disruption effect derives from impaired investor attention.