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
Date Written: July 12, 2019
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: Suggested Citation