Download This PaperData Specialists and Market Efficiency
65 Pages Posted: 27 Mar 2024 Last revised: 18 Apr 2024
Date Written: February 27, 2024
Abstract
In the age of big data, investors need to process increasingly complicated, multidimensional data to decipher different aspects of a firm. How do investors deal with such multidimensional data? We find more informed institutional investors tend to specialize in subsets of firm aspects (i.e., data specialists). Such data specialization, however, may hamper market efficiency. Inattention shocks to specialists hinder price efficiency in their specialized aspects of firms; other aspects of firms may also be negatively influenced due to strategic complementarity. Specialist inattention also significantly impacts anomaly returns, impeding the price corrective effect of news arrival.
Keywords: Big Data, Institutional Investors, Market Efficiency, Data Specialists, Strategic Complementarity, Anomalies
JEL Classification: G14, G23
Suggested Citation: Suggested Citation
Massimo Massa
INSEAD - Finance ( email )
Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)
Hong Zhang
Singapore Management University - Lee Kong Chian School of Business ( email )
50 STAMFORD ROAD
Office 4087, Lee Kong Chian School of Bu
Singapore, 178899
Singapore
Yijun Zhou (Contact Author)
City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )
55 Lexington Avenue
New York, NY 10010
United States