The Opposing Effects of Information Complexity and Information Content on Return Volatility

We evaluate the impact of complexity and content of new information on stock return volatility dynamics around 10-K fillings. On average, return volatility increases by 0.4% in the first four weeks after the release of the report, followed by a 2.6% decrease in the subsequent six weeks. This hump-shaped dynamics is more pronounced for firms with larger 10-K reports. The effects are economically significant: an options-based investment strategy exploring the volatility dynamics generates 17.3% annualized return spread. Our findings highlight the importance of timing for understanding the opposing effects of complexity and content of new information on asset prices