Speed Matters: Limited Attention and Supply-Chain Information Diffusion

55 Pages Posted: 3 Mar 2017 Last revised: 25 Jan 2018

See all articles by Ling Cen

Ling Cen

The Chinese University of Hong Kong

Michael G. Hertzel

Arizona State University (ASU) - Finance Department

Christoph Schiller

Arizona State University (ASU) - W.P. Carey School of Business

Date Written: November 2017

Abstract

Using the methodology of Hou and Moskowitz (2005), we develop a new measure of the speed of information diffusion along the supply chain. Using this measure, we find evidence that information diffuses more quickly when key market participants are less subject to limited attention constraints. Specifically, we find that the speed of information diffusion from customer to supplier stock returns is more rapid when analysts dual-cover and institutional investors cross-invest in the supplier and its principal customer. We rely on exogenous shocks to attention from regional flu epidemics and S&P 500 reconstitutions to establish causality. We demonstrate that our speed measure is useful in identifying customer momentum strategies and can be of value to managers who use information in stock prices to guide corporate decisions.

Keywords: Supply Chains, Speed, Information Diffusion

JEL Classification: L14, G14, G24

Suggested Citation

Cen, Ling and Hertzel, Michael G. and Schiller, Christoph, Speed Matters: Limited Attention and Supply-Chain Information Diffusion (November 2017). Available at SSRN: https://ssrn.com/abstract=2925460 or http://dx.doi.org/10.2139/ssrn.2925460

Ling Cen

The Chinese University of Hong Kong ( email )

CYT Building
Sha Tin
Hong Kong, Hong Kong
Hong Kong

HOME PAGE: http:///sites.google.com/site/cenling/

Michael G. Hertzel (Contact Author)

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-6869 (Phone)
602-965-8539 (Fax)

Christoph Schiller

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

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