Does Information Intensity Matter for Stock Returns? Evidence from Form 8-K Filings

Xiaofei Zhao ()
Additional contact information
Xiaofei Zhao: Jindal School of Management, University of Texas at Dallas, Richardson, Texas 75080

Management Science, 2017, vol. 63, issue 5, 1382-1404

Abstract: This paper identifies an important source of variation in U.S. firms’ material information flows: their Form 8-K filing frequency. Exploiting cross-sectional variation in this novel proxy for information intensity, this paper finds that firms with higher information intensity experience lower future returns and lower future volatilities. The marginal return impact is higher at low levels of information intensity and high levels of prior volatility. On average, an information-intensity-based long-short portfolio generates a return spread of 4.3% per year. After adjusting for the Fama–French three factors and the momentum factor, the abnormal return remains 4.4% per year. These novel findings suggest that, because of the dynamic nature of information arrival, the frequency/quantity of information is an important source affecting the information environment and stock returns of public companies. These findings are consistent with the predictions of a broad class of noisy rational expectations equilibrium models and estimation risk models, and they highlight the importance of learning in financial markets with incomplete information.

Keywords: incomplete information and learning; SEC current report; Form 8-K; information intensity; cross-sectional stock returns (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
https://doi.org/10.1287/mnsc.2015.2408 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:63:y:2017:i:5:p:1382-1404

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().