Netflix series premieres lead to stock declines, researchers said. How is this related?

Series premieres or the release of new episodes of popular shows on Netflix, Hulu and other streaming platforms are increasing the share of Wall Street bears, a study by a team of academics from the University of Hong Kong Business School claims.

The fact is that streaming services often post all new episodes at once during the night. The researchers write that on the day after such releases, the S&P 500 yield on average lags about 0.25 p.p. behind the hypothetical one. In annualized terms, the cumulative decline in returns could be about 2.3%, assuming an average of 10 popular releases per year, the study said.

The authors of the article explain it this way: traders and investors watch new series in the middle of the night and feel tired the next day due to lack of sleep. In this state, they have little desire to buy stocks because it requires "greater cognitive effort than the decision to sell," the article says. Exhausted traders prefer the easier way - to fix positions and go to rest. This leads to lower stock returns.

At the same time, this effect is more pronounced in stocks with a larger market capitalization, a high proportion of institutional investors and a higher share price, the article says. This suggests that not only retail investors, but also professionals are not immune to fatigue from watching TV series, the researchers said.

They haven't found a way to measure how many traders are actually awake trying to "devour" a new season of Stranger Things or Succession in one night. "But based on a decade of data collected, they suggest there are quite a few," the FT writes.

"When Netflix released all 15 episodes of the new season of Arrested Development in 2013, roughly 10% of viewers watched the entire season within 24 hours of release. Similarly, all nine episodes of the second season of Stranger Things were watched in droves by 361,000 Netflix subscribers within 24 hours of release, and racked up 15.8 million views in three days," the researchers noted.

This article was AI-translated and verified by a human editor