Where Has All the Data Gone?

Maryam Farboodi, Adrien Matray, Laura Veldkamp and Venky Venkateswaran

No 26927, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: As financial technology improves and data becomes more abundant, do market prices reflect this data growth? While recent studies documented rises in the information content of prices, we show that, across asset types, there is data divergence. Large, growth stock prices increasingly reflect information about future firm earnings. This is the rise reflected in the previous studies. But over the same time period, the information content of small and value firm prices was flat or declining. Our structural estimation allows us to disentangle these informational trends from changing asset characteristics. These facts pose a new puzzle: Amidst the explosion of data processing, why has this data informed only the prices of a subset of firms, instead of benefiting the market as a whole? Our structural model offers a potential answer: Large growth firms' data grew in value, as big firms got bigger and growth magnified the effect of these changes in size.

JEL-codes: G14 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-bec, nep-ifn, nep-pay and nep-tid
Note: AP
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Citations: View citations in EconPapers (8)

Published as Maryam Farboodi & Adrien Matray & Laura Veldkamp & Venky Venkateswaran & Itay Goldstein, 2022. "Where Has All the Data Gone?," The Review of Financial Studies, vol 35(7), pages 3101-3138.

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