Information Acquisition and Expected Returns: Evidence from EDGAR Search Traffic

Topic:

Information Acquisition and Expected Returns: Evidence from EDGAR Search Traffic

Time & Date:

10:30am-12:00 am, 2017/09/27 (Wednesday)

Venue:

Room 502, Daoyuan Building, CUHK(SZ)

Speaker:

Prof. Weikai Li Singapore Management University

Detail:

This paper examines expected return information embedded in investors' information acquisition activity. Using a novel dataset containing investors' access of company fillings through SEC EDGAR system, we reverse engineer their expectations over future payoffs and show that the abnormal number of IPs searching for firms' financial statements strongly predict future returns. The return predictability stems from investors allocating more effort to firms with improving fundamentals and following exogenous shock to underpricing. A long-short portfolio based on our measure of information acquisition activity generate monthly abnormal return of 80 basis points that persist for two quarters. These results suggest that information acquisition reveals latent information about firms' fundamental and stock prices.