TY - JOUR
T1 - Comovement, Financial Reporting Complexity, and Information Markets: Evidence from the Effect of Changes in 10-Q Lengths on Internet Search Volumes and Peer Correlations
AU - Filzen, Joshua J.
AU - Schutte, Maria Gabriela
N1 - Filzen, Joshua J. and Schutte, Maria Gabriela. (2017). "Comovement, Financial Reporting Complexity, and Information Markets: Evidence from the Effect of Changes in 10-Q Lengths on Internet Search Volumes and Peer Correlations". The North American Journal of Economics and Finance, 39, 19-37. http://dx.doi.org/10.1016/j.najef.2016.10.001
PY - 2017/1/1
Y1 - 2017/1/1
N2 - We investigate the effect of financial reporting complexity on stock comovement. We hypothesize that investors deal with complexity increases by acquiring low cost information. This information is typically informative not just about the firm of interest but also about other firms with similar fundamentals, which generates excess comovement. We find that increases in 10-Q word counts, a complexity proxy, are consistently followed by increases in 1) internet searches about the firm and 2) R 2 s from regressions between the firm’s returns and its peers’. On a large scale, complexity-induced comovement might hinder investors' ability to discriminate across stocks and identify business innovators.
AB - We investigate the effect of financial reporting complexity on stock comovement. We hypothesize that investors deal with complexity increases by acquiring low cost information. This information is typically informative not just about the firm of interest but also about other firms with similar fundamentals, which generates excess comovement. We find that increases in 10-Q word counts, a complexity proxy, are consistently followed by increases in 1) internet searches about the firm and 2) R 2 s from regressions between the firm’s returns and its peers’. On a large scale, complexity-induced comovement might hinder investors' ability to discriminate across stocks and identify business innovators.
KW - comovement
KW - complementarities
KW - financial reporting complexity
KW - information acquisition
KW - information processing costs
UR - https://scholarworks.boisestate.edu/account_facpubs/44
U2 - 10.1016/j.najef.2016.10.001
DO - 10.1016/j.najef.2016.10.001
M3 - Article
JO - Accountancy Faculty Publications and Presentations
JF - Accountancy Faculty Publications and Presentations
ER -