I estimate the costs of information acquisition and the extent to which they explain stock anomaly returns. The SEC’s staggered implementation of EDGAR from 1993 to 1996 greatly lowered the costs of acquiring accounting information. I study how this quasi-exogenous and staggered shock affects the profitability of 126 accounting and 108 non-accounting anomalies. The EDGAR introduction lowers the average alphas for the accounting anomalies by 4.0% per year, explaining more than half of the pre-EDGAR alphas. The attenuation is stronger for the accounting anomaly portfolios that require more up-to-date accounting information and those consisting of EDGAR filer stocks with less information available in the pre-EDGAR period. By contrast, alphas for the non-accounting anomalies remain unaffected. These results imply that the information acquisition costs, which are usually neglected, can be as important as the transaction or short sale costs.
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