Effects of New Information Technology on Stock Market Anomalies

Has ease of access to, and processing of, firm accounting data suppressed stock anomalies by leveling the information playing field? In their July 2024 paper entitled “The Effect of New Information Technologies on Asset Pricing Anomalies”, David Hirshleifer and Liang Ma test the effects of mandating Electronic Data Gathering, Analysis and Retrieval (EDGAR) during April 1993 to May 1996 and eXtensible Business Reporting Language (XBRL) during 2009 to 2011 on well-known stock return anomalies attributed to mispricing. EDGAR makes firm accounting data available electronically, and XBRL reduces the cost of processing such data by making it machine readable. They focus on eight anomalies, five of which rely on accounting data (accruals, net operating assets, investment-to-assets ratio, asset growth and gross profitability) and three of which rely on market data (momentum, net stock issuance and composite equity issuance). They examine effects of EDGAR/XBRL implementations on each anomaly individually, on the five accounting anomalies in aggregate and on the three non-accounting anomalies in aggregate. They carefully consider EDGAR/XBRL implementation dates and fiscal years by firm to compare anomalies for implemented and non-implemented sets of stocks. Using firm characteristics and monthly returns for a broad sample of U.S. common stocks during July 1992 through June 1997 (July 2009 through June 2012) for the EDGAR (XBRL) sample, they find that: (more…)