Machine Invasion : Automation in Information Acquisition and the Cross-Section of Stock Returns

We estimate the number of machines “covering” a firm by separating machine IPs from human IPs based on the intensity of information retrieval using the EDGAR web log dataset. We investigate the relationship of machine coverage and the cross-section of stock returns and find that stocks in the lowest quintile of machine coverage outperform those in the highest quintile by 6% annually after adjusting for risk. Our results indicate that automation in information processing has a significant impact on the cross-section of stock returns and are consistent with recent theoretical work on big data (Begenau, Farboodi, and Veldkamp, 2018)