Using the EDGAR Server Log data set, I present evidence that automated information acquisition is informative and correlated with important firm characteristics, such as institutional ownership. I use the staggered adoption of the SEC's rule regarding interactive data for financial reporting as a shock to the structure of financial information which lowers information acquisition costs. The mandate leads to more information acquisition through the EDGAR website, especially by using automated computer algorithms (robots). The consequences on the stock market include a lower abnormal trading volume and higher illiquidity, but also lower bid-ask spreads and lower return volatility. The effects are significantly correlated with the relative importance of robots acquiring information about a firm's financial position. My results suggest that the growing importance of automated and algorithmic methods, which enable investors to collect and process the information faster, has a notable impact on the equity markets.
Draft available soon
We investigate how the structure of liabilities affects financial intermediaries’ asset holdings. Following a change in regulation that made prime money market funds’ liabilities less money-like, safer funds exited the industry. The remaining funds increased the riskiness of their portfolios in response to an increase in the sensitivity of flows to performance. Consequently, issuers with lower credit risk have less access to funding from US money market funds. These findings indicate that regulation is crucial for liquidity creation and provide evidence for theories highlighting that financial intermediaries’ assets and liabilities are jointly determined.
Full paper available at SSRN
Mandatory second year course for the BSc Program in Business and Economics at the Stockholm School of Economics.