Topic: Information Acquisition and Expected Returns: Evidence from EDGAR Search Traffic
Speaker: Frank Weikai Li, Singapore Management University
Time: Wednesday, 14 December, 11:30-13:00
Place: Room 217, Guanghua Building 2
This paper examines expected return information embedded in investors' information acquisition activity. Using a novel dataset containing investors' access of company filings through SEC's 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 generates monthly abnormal return of 80 basis points that does not reverse over the long-run. The return predictability is stronger among firms with larger and lengthier financial filings that are more costly to process. Collectively, these findings support theories of endogenous information acquisition that costly information acquisition reveals the value of information.
Dr.Frank Weikai Li is an Assistant Professor of Finance in Lee Kong Chian School of Business, Singapore Management University. His research interests are Empirical Asset Pricing; Behavioral Finance; Short Selling; Insider Trading; International Financial Markets. He holds a B.A. in Economics from Zhejiang University. He holds a MSc in Finance from Tulane University.He holds a Ph.D. in Finance from Hong Kong University of Science and Technology.
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