Localized Information Acquisition

Abstract

This study identifies previously undocumented geography-related diversity in investors’ information acquisition behavior ahead of days with scheduled earnings announcements. IP geo-localization of the SEC’s EDGAR server log reveals that local investors, on average, scale up their information acquisition prior to the announcement, prompted by changes in pre-announcement uncertainty and varying predictably with exogenous firm relocation. Contrariwise, their non-local counterparts tend to hold off until the day of the earnings announcement, when new filings information becomes available. Further analysis implies that this divergent behavior is most consistent with a heterogeneous information-acquisition cost explanation. Lastly, in a cross-sectional asset pricing application, we find that the earnings announcement-day premium is higher when pre-announcement information acquisition by local investors is higher, controlling for time-variant and -invariant firm characteristics.

Keywords: information acquisition, geography, earnings days, asset pricing

JEL Classification: G10, G14, G40