Informing the Market: The Effect of Modern Information Technologies on Information Production

Review of Financial Studies, Forthcoming

57 Pages Posted: 23 Aug 2017 Last revised: 13 Jul 2019

See all articles by Meng Gao

Meng Gao

University of Illinois at Urbana-Champaign - Department of Finance

Jiekun Huang

University of Illinois at Urbana-Champaign - Department of Finance

Date Written: July 12, 2019

Abstract

Modern information technologies have fundamentally changed how information is disseminated in financial markets. Using the staggered implementation of the EDGAR system in 1993-1996 as a shock to information dissemination technologies, we find evidence that internet dissemination of corporate disclosures increases information production by corporate outsiders. Trades by individual investors, especially those with access to the internet, become more informative about future stock returns following the EDGAR implementation. The amount and accuracy of information produced by sell-side analysts increase after the implementation. These results suggest that greater and broader information dissemination facilitated by modern information technologies improves information production.

Keywords: Information production, internet, informational efficiency, individual investors, financial analysts

JEL Classification: G12, G14

Suggested Citation

Gao, Meng and Huang, Jiekun, Informing the Market: The Effect of Modern Information Technologies on Information Production (July 12, 2019). Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3023689 or http://dx.doi.org/10.2139/ssrn.3023689

Meng Gao

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

Jiekun Huang (Contact Author)

University of Illinois at Urbana-Champaign - Department of Finance ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

HOME PAGE: http://www.huangjk.info

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