Information Acquisition and Market Liquidity: Evidence from Edgar Search Activity

We find that information acquisition is associated with an improvement in market liquidity. An empirical analysis of search activity using EDGAR as a proxy for information acquisition shows a theoretical gap in market microstructure models. We also find that EDGAR search is associated with nonsynchronicity, more efficient pricing, and negatively associated with the PIN measure. These results demonstrate that the main finding can be explained through improved incorporation of information into prices and use of sophisticated trading strategies by informed traders.