Information Acquisition and Expected Returns: Evidence from EDGAR Search Traffic

Abstract

Using a novel dataset containing investors' access of company filings through the SEC's EDGAR system, we show that the abnormal number of IPs searching for firms' financial statements strongly predicts future stock returns and firm fundamentals. Consistent with theories of costly information acquisition, the return predictability is more pronounced for firms with larger and lengthier financial filings that are more costly to process, and for IPs searching current and historical filings simultaneously. Our findings suggest investors' costly information acquisition activities reveal their expectation of future firm performance.

Keywords: Information Acquisition, EDGAR Search, Return Predictability, Market Efficiency

JEL Classification: G12, G14