News or Noise: Mobile Internet Technology and Stock Market Activity

Abstract

Does mobile internet distract “connected investors” from participating in financial markets? We examine this limited attention hypothesis using exogenous outages of the Blackberry Internet Service (BIS). We find that trading volume and trading frequency surge by 6% on days when BIS unexpectedly goes offline, consistent with mobile internet-induced distractions deterring stock market participation. We further find a 4% increase in the number of firm filings downloaded from the SEC’s EDGAR system during BIS outages. These novel results suggest that mobile internet distractions inhibit information gathering and trading activities. We find that these trading and information-gathering treatment effects are magnified in larger firms and firms with more institutional ownership and analyst coverage, consistent with Blackberry being a widely used device among connected financial professionals during our sample period (2009-2011). Taken together, our findings indicate that mobile internet has the potential to divert the limited attention of connected investors from information-gathering and trading.

Keywords: mobile technology, investor activity, stock market liquidity, limited attention, distraction

JEL Classification: D83, G12, G14, L86