Life in the Fast Lane: Internet Connectivity and Information Flow

• In Event: AIS and the Markets

Abstract

We investigate the role of Internet connectivity on the incorporation of information into stock prices. Using a dataset that tracks user requests for filings stored in the SEC EDGAR database, we find a positive association between the percent of high speed Internet downloads of newly released 10-K, 10-Q, and 8-K filings and stock price reaction to the release of these filings. We also find that a greater percent of high speed downloads is associated with higher trading volume around the release of these disclosures. The positive association between the percent of high speed downloads and filing date price reaction is greater when institutional ownership and analyst following is lower and when the disclosure is more complex. Similar cross-sectional results hold for trading volume. We further provide evidence that a greater percent of high speed downloads is associated with a lower price drift subsequent to the release of a 10-K, 10-Q, and 8-K filing on EDGAR.

Authors

• Gary Chen, University of Illinois-Chicago

• Jie Zhou, National University of Singapore