Priority Dissemination of Public Disclosures

Dong, Bei; Li, Edward Xuejun; Ramesh, K.; Shen, Min

doi:10.2308/accr-51139

Cited by 14 publications

(12 citation statements)

References 38 publications

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“…Dong et al. [, figure , p. 2244] report minute‐by‐minute returns around the public dissemination of earnings announcements. For the pre‐Reg FD sample (during regular trading hours), when sophisticated market participants received access to earnings news 15 minutes early, they show a one‐minute absolute return of 17 bps.…”

Section: Evidence On Trading Advantagementioning

confidence: 99%

Run EDGAR Run: SEC Dissemination in a High-Frequency World

Rogers

Skinner

Zechman

2017

Journal of Accounting Research

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We describe the process through which the Securities and Exchange Commission (SEC) makes filings "publicly available." For a sample of Form 4 (insider trade) filings, we show that, during the period we examine, the majority of filings are available to paying subscribers of the SEC's public dissemination system (PDS) feed before they are posted to the EDGAR website, and so provide subscribers and their clients with a private advantage. We show that this advantage translates into an economically significant trading advantage, and prices, volumes, and spreads respond to the news contained in filings beginning around 30 seconds before public posting. These findings indicate that 1 Fama [1991, p. 1607] writes that "[t]he cleanest evidence on market-efficiency comes from event studies, especially event studies on daily returns. When an information event can be dated precisely . . . event studies can give a clear picture of the speed of adjustment of prices to information." SEC DISSEMINATION IN A HIGH-FREQUENCY WORLD 461 measured in milliseconds (or even microseconds) are economically valuable (Goldstein, Kumar, and Graves [2014], Budish, Crampton, andShim [2015], Jones [2013], O'Hara [2015]). 3 The HFT traders we spoke to indicate that, conditional on obtaining the information first, the length of private advantage is not important because positions can be established within microseconds. While the casual observer may assume that the SEC dissemination process through EDGAR is effectively instantaneous, we show that, during the period we examine (March 1, 2012 to December 31, 2013), the process from upload to posting typically takes around 36 seconds (median). We further show that the news is available to certain intermediaries and investors before it is posted to the public EDGAR website: for 57% of insider purchases, filings are available to at least one PDS (public dissemination service) subscriber before they are posted to the EDGAR website. 4 This proportion is a lower bound on the relative frequency of private advantage because we have data from only one of approximately 40 PDS subscribers. 5 We show that, when the PDS feed is first, prices, volumes, and spreads move 15-30 seconds before the news is posted to the EDGAR site. We also show that, when the PDS feed is first and results in both private and public trading, a return of 28 basis points (during a window that averages 81 seconds in length) is available to the informed traders, which is economically significant for HFT firms. 6 This implies that, during the period we examine, the process through which filings are disseminated via EDGAR provides certain intermediaries and their clients with a timing advantage and that some market participants trade and profit on this advantage. In response to our study, Mary Jo White, the SEC Chair, announced plans on December 19, 2014, to enhance the system to "ensure that EDGAR filings are available to the public on the SEC [EDGAR] website before such filings are made available to PDS subscribers." 7 We focus on Form ...

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Section: Evidence On Trading Advantagementioning

confidence: 99%

Run EDGAR Run: SEC Dissemination in a High-Frequency World

Rogers

Skinner

Zechman

2017

Journal of Accounting Research

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“…If increased price discovery is concentrated immediately upon the earnings press release (street earnings activation), we expect a positive coefficient on the P ost ANN 1 (P ost ACT 1 ) indicator. If some investors receive privileged pre-announcement access to earnings news (Dong et al, 2015), we may also observe significant positive coefficients on the P re ANN t indicators. Similarly, if some I/B/E/S customers receive privileged (delayed) data updates, we may observe significant positive coefficients on P re ACT i indicators (in the case of privileged data updates) or on longer lagged P ost ACT i indicators (in the case of delayed price discovery following activations).…”

Section: Intraday Tests Of Investors' Reliancementioning

confidence: 89%

“…We include hourly time-of-day fixed effects in the regression to control for the fact that price discovery may be concentrated at certain times of day, such as the market opening hour. 26 We also include calendar year-quarter fixed effects, and require all firm-quarters to have [-960, +960] returns with an absolute value greater than 23 Similar RPD tests appear in prior studies examining priority dissemination of earnings news (Dong et al, 2015), analysts' response to corporate news events , and investors' response to I/B/E/S activations of analyst forecasts (Akbas et al, 2018). 24 Our inferences remain unchanged if we estimate our tests over the full 2006-2015 sample period.…”

Section: Intraday Tests Of Investors' Reliancementioning

confidence: 99%

“…To alleviate these concerns, we perform intra-day price dis-covery tests in the post-2009 period. Similar to Dong et al (2015); Li et al (2015), and Akbas et al (2018), we divide the two-day announcement window centered on the earnings press release into 15-minute intervals and regress the portion of the announcement-window return concentrated in a given 15-minute interval on lead and lag activation indicators. We find robust evidence of incremental increases in price discovery during the 15-minute window subsequent to TR street earnings activation, as well as a relative increase in price discovery during the hour immediately following activation compared with the preceding hour, consistent with investors continuing to rely on TR to process street earnings information in the post-2009 period.…”

Section: Introductionmentioning

confidence: 99%

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The Roles of Data Providers and Analysts in the Production, Dissemination, and Pricing of Street Earnings

et al. 2018

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Street earnings are non-GAAP earnings, adjusted for consistency with the analyst majority basis and disseminated by forecast data providers (FDPs). We find that the time it takes an FDP to incorporate street earnings in its products (activation delay, hereafter) reflects variation in the difficulty of constructing street earnings, investor demand for timely street earnings, and FDPs' limited attention and resources. Furthermore, the market reaction to reported earnings is more timely when activation delay is shorter, and price discovery is highly concentrated during the hour after street earnings are activated. Finally, activation delay increases the delay with which street earnings are incorporated in analyst forecasts. We conclude that frictions in information processing prevent market participants from instantaneously constructing and incorporating street earnings in their decisions, and that FDPs play a key role in alleviating these frictions.

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“… Dong, Li, Ramesh, and Shen () note that I/B/E/S time stamps are largely unavailable and/or unreliable prior to 1999. …”

mentioning

confidence: 99%

March Market Madness: The Impact of Value‐Irrelevant Events on the Market Pricing of Earnings News

Drake

Gee

Thornock

2015

Contemporary Accting Res

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Each year, the NCAA basketball tournament (March Madness) is a daytime distraction for millions of people, providing a largely exogenous shock to investor attention. We investigate whether March Madness influences the market response to earnings by diverting investor attention away from earnings news. We find that the price reaction to earnings news released during March Madness is muted. This result generally holds across several samples and additional analyses. We also find that the result is more muted for low institutional ownership firms, consistent with the effect being driven by less-sophisticated investors. Furthermore, we find that it takes the market 30 to 60 days to correct for the distraction effect. Overall, we provide a unique test of the theory of limited attention by documenting that extraneous events can have a significant impact on the pricing of earnings. * Accepted by Shivaram Rajgopal. We thank Mark Bradshaw, Ted Christensen, Jeff Hoopes, Rick Mergenthaler, Sam Melessa, Brady Twedt and participants at the 2012 BYU Accounting Symposium and doctoral students at the University of Washington for helpful comments and discussions. We also thank Spencer Young for excellent research assistance. We are also grateful to the Marriott School of Management, Stanford Graduate School of Business, and Foster School of Business for financial support.

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Priority Dissemination of Public Disclosures

Cited by 14 publications

References 38 publications

Run EDGAR Run: SEC Dissemination in a High-Frequency World

Run EDGAR Run: SEC Dissemination in a High-Frequency World

The Roles of Data Providers and Analysts in the Production, Dissemination, and Pricing of Street Earnings

March Market Madness: The Impact of Value‐Irrelevant Events on the Market Pricing of Earnings News

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