How Quickly Do Markets Learn? Private Information Dissemination in a Natural Experiment

This study takes advantage of a unique episode in which the SEC distributed securities filings to a small group of investors ahead of their public releases. The random delay time provides a rare natural experiment for examining how markets process new private information. It takes minutes — not seconds — for informed traders to incorporate fundamental information into stock prices. The early-informed convey more information into stock prices when the delay before public release is longer. More importantly, the rate at which information is impounded into prices is more correlated with the length of the predicted delay than with the actual delay.