Brown Bag Seminar - Marco Zanotti (SHoF/SSE), Are New Technologies Replacing the Information Produced by Financial Markets?
Welcome to an academic seminar hosted by the Swedish House of Finance and the Department of Finance.
Paper
Are New Technologies Replacing the Information Produced by Financial Markets?
Abstract:
Firms are increasingly collecting and analyzing data. After adopting technologies to exploit customer data collected from their website, firms’ investment becomes less sensitive to their stock price. This effect is consistent with a model in which data technologies improve managers’ internal information about future demand and reduce their reliance on stock prices for that information. This “replacement effect” is robust to alternative explanations and reverses when data usage is limited by privacy restrictions. Our findings suggest that the diffusion of data technologies reduces the informational role of financial markets in guiding firms’ investment decisions.