Do Information Acquisition Costs Matter? The Effect of SEC EDGAR on Stock Anomalies

76 Pages Posted: 13 Sep 2021 Last revised: 11 Apr 2022

See all articles by Yong Hyuck Kim

Yong Hyuck Kim

Michigan State University, Department of Finance

Zoran Ivkovich

Michigan State University, Department of Finance

Dmitriy Muravyev

Michigan State University - Department of Finance; Canadian Derivatives Institute

Date Written: February 22, 2021

Abstract

We estimate the costs of information acquisition and the extent to which they explain stock anomaly returns. The SEC’s staggered implementation of EDGAR from 1993 to 1996 greatly lowered the costs of acquiring accounting information. We study how this quasi-exogenous and staggered shock affects the profitability of 126 accounting and 108 non-accounting anomalies. The EDGAR introduction lowers the average alphas for the accounting anomalies by 4.0% per year, explaining more than half of the pre-EDGAR alphas. The attenuation is stronger for the accounting anomaly portfolios that require more up-to-date accounting information and those consisting of EDGAR filer stocks with less information available in the pre-EDGAR period. By contrast, alphas for the non-accounting anomalies remain unaffected. These results imply that the information acquisition costs, which are usually neglected, can be as important as the transaction or short sale costs.

Keywords: Information acquisition costs, stock anomalies, EDGAR, limits-to-arbitrage

JEL Classification: G12, G14

Suggested Citation

Kim, Yong Hyuck and Ivkovich, Zoran and Muravyev, Dmitriy, Do Information Acquisition Costs Matter? The Effect of SEC EDGAR on Stock Anomalies (February 22, 2021). Available at SSRN: https://ssrn.com/abstract=3921785 or http://dx.doi.org/10.2139/ssrn.3921785

Yong Hyuck Kim (Contact Author)

Michigan State University, Department of Finance ( email )

Michigan State University
315 Eppley Center
East Lansing, MI 48824
United States

HOME PAGE: http://sites.google.com/view/yonghkim/home

Zoran Ivkovich

Michigan State University, Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States

Dmitriy Muravyev

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States

Canadian Derivatives Institute ( email )

3000, chemin de la Côte-Sainte-Catherine
Montréal, Québec H3T 2A7
Canada

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