Conference Agenda

Using the staggered adoption of data technologies providing firms with novel insights about their customers, we show that their investment becomes significantly less sensitive to non-fundamental stock price movements after adoption. The effect is consistent with data technologies improving managers’ internal information about future demand, thereby reducing their reliance on stock market signals. This “replacement effect” is robust to alternative explanations and reverses under data-privacy restrictions.

Our findings suggest that the diffusion of data technologies weakens the informational role of stock prices in guiding real investment decisions.

Alternative data has reshaped financial markets, yet it arises outside traditional disclosure channels, beyond market participants' control. We exploit Apple’s App Tracking Transparency as a privacy-driven shock to alternative data generation, revealing a previously overlooked vulnerability in financial markets. The policy weakens the predictive power of mobile traffic for firm performance and mutual fund trading. Funds reliant on such data lose their edge in exposed stocks, while analyst forecasts citing mobile traffic become less accurate and elicit weaker reactions. Firms more dependent on these market participants face greater information frictions.