Information Acquisition and Expected Returns: Evidence from EDGAR Search Traffic

75 Pages Posted: 11 Sep 2017 Last revised: 24 Feb 2020

See all articles by Frank Weikai Li

Frank Weikai Li

Singapore Management University - Lee Kong Chian School of Business

Chengzhu Sun

Hong Kong University of Science & Technology (HKUST)

Date Written: August 8, 2018

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

Suggested Citation

Li, Frank Weikai and Sun, Chengzhu, Information Acquisition and Expected Returns: Evidence from EDGAR Search Traffic (August 8, 2018). Asian Finance Association (AsianFA) 2018 Conference, Available at SSRN: https://ssrn.com/abstract=3031977 or http://dx.doi.org/10.2139/ssrn.3031977

Frank Weikai Li (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Chengzhu Sun

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

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