Investor Information Gathering and the Resolution of Uncertainty

Information gathering is an instinctive response to uncertainty, but such efforts may not fully resolve the uncertainty that prompted them. This implies that proxies for investor information gathering may endogenously reflect investor uncertainty, not only before but also after information collection. I find evidence consistent with this pattern using data on public internet access of SEC filings around firms’ earnings announcements. My findings suggest that proxies for investor search and information gathering can capture both information demand and unresolved uncertainty, which has implications for the interpretation of common empirical tests involving such proxies. Controlling for the uncertainty that motivates information gathering is a potential approach for addressing this endogeneity issue. However, my findings indicate that firm-specific information gathering reflects unique information about firm-level investor uncertainty not captured by common controls for uncertainty. Analyses that exploit plausibly exogenous variation in information gathering suggest a promising direction for future research.

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Work Title Investor Information Gathering and the Resolution of Uncertainty
Access
Open Access
Creators
  1. Jed J. Neilson
Keyword
  1. Information acquisition
  2. Investor attention
  3. Search
  4. Uncertainty
  5. Earnings announcements
  6. EDGAR
License CC BY-NC-ND 4.0 (Attribution-NonCommercial-NoDerivatives)
Work Type Article
Publisher
  1. Elsevier BV
Publication Date June 2022
Publisher Identifier (DOI)
  1. 10.1016/j.jacceco.2022.101513
Source
  1. Journal of Accounting and Economics
Deposited July 01, 2022

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Version 1
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  • Created
  • Added Full Manuscript and Online Appendix-1.pdf
  • Added Creator Jed J. Neilson
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  • Updated Work Title, Keyword, Description Show Changes
    Work Title
    • Investor Information Gathering and the Resolution of Uncertainty
    • ! Investor Information Gathering and the Resolution of Uncertainty
    Keyword
    • Information acquisition, Investor attention, Search, Uncertainty, Earnings announcements, EDGAR
    Description
    • Information gathering is an instinctive response to uncertainty, but such efforts may not fully resolve the uncertainty that prompted them. This implies that proxies for investor information gathering may endogenously reflect investor uncertainty, not only before but also <i>after</i> information collection. I find evidence consistent with this pattern using data on public internet access of SEC filings around firms’ earnings announcements. My findings suggest that proxies for investor search and information gathering can capture both information demand and unresolved uncertainty, which has implications for the interpretation of common empirical tests involving such proxies. Controlling for the uncertainty that motivates information gathering is a potential approach for addressing this endogeneity issue. However, my findings indicate that firm-specific information gathering reflects unique information about firm-level investor uncertainty not captured by common controls for uncertainty. Analyses that exploit plausibly exogenous variation in information gathering suggest a promising direction for future research.
    • Information gathering is an instinctive response to uncertainty, but such efforts may not fully resolve the uncertainty that prompted them. This implies that proxies for investor information gathering may endogenously reflect investor uncertainty, not only before but also after information collection. I find evidence consistent with this pattern using data on public internet access of SEC filings around firms’ earnings announcements. My findings suggest that proxies for investor search and information gathering can capture both information demand and unresolved uncertainty, which has implications for the interpretation of common empirical tests involving such proxies. Controlling for the uncertainty that motivates information gathering is a potential approach for addressing this endogeneity issue. However, my findings indicate that firm-specific information gathering reflects unique information about firm-level investor uncertainty not captured by common controls for uncertainty. Analyses that exploit plausibly exogenous variation in information gathering suggest a promising direction for future research.
  • Updated Work Title Show Changes
    Work Title
    • ! Investor Information Gathering and the Resolution of Uncertainty
    • Investor Information Gathering and the Resolution of Uncertainty
  • Updated