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What investors want to know -- and when

Published: 2014-01-27

Associate Professor Darren Roulstone

Timing, it’s been said, is everything. A study by Fisher’s Darren Roulstone found that investor demand for information about stock earnings and market performance leading up to earnings announcements can impact how capital markets disseminate that vital investor information.

Roulstone analyzed data from Google searches for ticker symbols of S&P 500 firms before, during and after earnings announcements.These searches removed the normal level of Google search volume for S&P 500 ticker symbols. The data revealed that, on average, Internet searches for these symbols increased two weeks prior to earnings announcements, spiked on announcement dates and remained elevated in the two weeks that followed.

The finding suggests that information diffusion is not instantaneous with the release of the earnings information, but rather is spread over a period of time surrounding the announcement. The study also found that:

  • Increased media attention about a firm can drive up the demand for information, but a large number of competing earnings announcements can distract investors, thereby reducing information demand
  • When investors search for more information in the days just prior to an announcement, pre-announcement price and volume changes reflect more of the upcoming earnings news, thus partially preempting the content of the earnings announcement

The study suggests that Google and other search platforms provide a way for investors to gather information on firms and examines how this information affects stock market activity. Knowing how earnings information is demanded and disseminated can be beneficial to firms in how they manage and control important messaging.