Investor Search and Asset Prices

Abstract

Firms can have fundamental similarities and relatedness, such as operating in the same geographic area and industries, being customers or suppliers, etc. Understanding these connections has implications for cross-asset return predictability because information can flow through these linkages sluggishly. We introduce a novel peer momentum by linking firms that are co-searched by investors on the SEC EDGAR server. A trading strategy based on this peer momentum generates an annualized return of 13%, and it remains robust when controlling for other peer momentum, known asset pricing anomalies, and firm characteristics. Moreover, it outperforms the shared-analyst peer momentum identified by Ali and Hirshleifer (2020).

Keywords: EDGAR, return predictability, momentum strategy, network theory JEL: G10, G12, G14, G17, L22

JEL Classification: G10, G12, G14, G17, L22