Does Individual Investor Attention to Accounting Information Influence the Pricing of Stocks?

Individual investors' processing of information is conventionally considered to be less efficient than that of more sophisticated institutional investors. Using Google Trends' daily search volume index, I create a firm-specific measure of individual investors' attention to accounting information, such as financial reports and earnings, relative to other value-relevant information, such as price trends. I investigate whether capital market anomalies are attenuated or exacerbated when individual investors allocate more attention to accounting information. I find that when individual-investor attention to accounting information is high, reactions to earnings announcements are stronger and the post-earnings announcement drift and the profit anomaly are weaker. However, the accrual anomaly is stronger, which is not the case when sophisticated-investor attention is high. Under the premise that anomalies indicate inefficiencies, this study provides evidence that individual investors' acquisition of accounting information does not necessarily contribute to informationally efficient capital markets