The Impact of Automated Information Acquisition on the Stock Market

Does collecting regulatory financial information with the help of automated computer algorithms (robots) affect the stock market? Using the EDGAR Server Log data set, I construct firm-level measures of information acquisition by robots and non-robots and show that robots are extensively used for information acquisition when new information becomes available. The SEC's mandate regarding interactive data leads to a notable increase in information demand, consistent with decreased information acquisition costs for standardised regulatory financial information in XBRL-format. A higher relative importance of robots acquiring information about a firm combined with the XBRL adoption is associated with a consequent increase in trading volume, smaller bid-ask spreads, lower volatility, positive cumulative abnormal return and increased volume coefficient of variation. The findings are consistent with the idea that automation and standardisation benefits informed investors disproportionately more than uninformed traders.