Abstract
We show that information demand density (IDD), proxied by abnormal online search volume divided by the magnitude of information asymmetry, has material impacts on price efficiency. First, IDD reduces the post-earnings announcement drift (PEAD) by improving the informational efficiency. Second, IDD is higher for nonlocal investors, which could also reduce the magnitude of PEAD. Third, the impact of IDD is more pronounced for the non-SOEs firms, firms with stronger information environment, higher media coverage, and headquartered in big cities. These results are robust to alternative measurements of IDD and regression windows.
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