Attention, Distraction, and the Speed of Information Transmission

We show that investor attention accelerates the incorporation of information contained in 10-Q, 10-K, and 8-K reports into prices. Quantifying news-level attention using the activity on the SEC's EDGAR server, we establish that the count of the IP addresses visiting a filing is positively and negatively related to the proportion of the long-term price response revealed, respectively, on and after its submission date. We then propose a direct measure of investor distraction by considering the observed amount of attention that disclosures from other industries attract. We find that distraction negatively impacts the speed of information dissemination even when the attention a report receives is controlled for. We hypothesize that this is due to investors still needing to allocate their limited information acquisition capacity after choosing a submenu of news to be attentive to and provide evidence consistent with this claim. Our results suggest that information production follows a two-step process and hence that direct proxies for attention that are based on news-reading and news-searching activity may not fully capture investors' information acquisition choices.