Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5102250 | The North American Journal of Economics and Finance | 2017 | 19 Pages |
Abstract
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) R2s 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.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Joshua J. Filzen, Maria Gabriela Schutte,