Investor Information Gathering and the Resolution of Uncertainty

57 Pages Posted: 12 May 2022

See all articles by Jed Neilson

Jed Neilson

Pennsylvania State University

Date Written: April 27, 2022

Abstract

Information gathering is an instinctive response to uncertainty, but such efforts may not fully resolve the uncertainty that prompted them. This implies that proxies for investor information gathering may endogenously reflect investor uncertainty, not only before but also after information collection. I find evidence consistent with this pattern using data on public internet access of SEC filings around firms’ earnings announcements. My findings suggest that proxies for investor search and information gathering can capture both information demand and unresolved uncertainty, which has implications for the interpretation of common empirical tests involving such proxies. Controlling for the uncertainty that motivates information gathering is a potential approach for addressing this endogeneity issue. However, my findings indicate that firm-specific information gathering reflects unique information about firm-level investor uncertainty not captured by common controls for uncertainty. Analyses that exploit plausibly exogenous variation in information gathering suggest a promising direction for future research.

Keywords: Information acquisition, Investor attention, Search, Uncertainty, Earnings announcements, EDGAR

JEL Classification: D80, D83, D89, G12, G14, M40

Suggested Citation

Neilson, Jed, Investor Information Gathering and the Resolution of Uncertainty (April 27, 2022). Journal of Accounting & Economics (JAE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=4095327

Jed Neilson (Contact Author)

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States
8148650327 (Phone)

HOME PAGE: http://directory.smeal.psu.edu/jjn12

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