Do Retail Investors Use SEC Filings? Evidence from EDGAR Search

62 Pages Posted: 8 Nov 2018

See all articles by Sabrina Chi

Sabrina Chi

Texas Tech University - Area of Accounting

Devin M. Shanthikumar

University of California, Irvine - Paul Merage School of Business

Date Written: October 25, 2018

Abstract

We address whether retail investors use SEC filings when making trading decisions. We find that retail investor trading, both buying and selling, is significantly related to EDGAR search for 10-K and 10-Q filings, more so than to Google search. This is true for firms with high or low visibility, firm-days with and without press coverage, and during or excluding earnings-announcement and filing windows. The results of lead-lag and two-stage-least square analyses are consistent with search leading to trade. In addition, the direction of retail investors’ trading is consistent with the direction of earnings changes reported in the downloaded filings, suggesting that retail investor trading direction is influenced by the accounting information they read in the filings. We also find that the significantly positive relation between retail trading and EDGAR search is strongest for the most easily readable 10-K and 10-Q filings. Finally, we find that retail investor trading-predicted returns are higher on days with heavier EDGAR search, consistent with retail investors making more profitable, or at least less loss making, trades when doing more research on EDGAR. Overall, our results provide strong evidence that retail investors use EDGAR filings data in making their trading decisions.

Keywords: retail investors, investor sophistication, investor attention,Google search, EDGAR

JEL Classification: G11, D14, M40, M41, G12

Suggested Citation

Chi, Sabrina and Shanthikumar, Devin M., Do Retail Investors Use SEC Filings? Evidence from EDGAR Search (October 25, 2018). Available at SSRN: https://ssrn.com/abstract=3281234 or http://dx.doi.org/10.2139/ssrn.3281234

Sabrina Chi

Texas Tech University - Area of Accounting ( email )

P.O. Box 42101
Lubbock, TX 79409
United States

Devin M. Shanthikumar (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
SB 440
Irvine, CA 92697-3125
United States

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