Google Search Volume and its Influence on Liquidity and Returns of German Stocks
Financial Markets and Portfolio Management, Vol. 25, No. 3, pp. 239-264, 2011
30 Pages Posted: 28 Aug 2010 Last revised: 10 Aug 2014
There are 2 versions of this paper
Google Search Volume and its Influence on Liquidity and Returns of German Stocks
Google Search Volume and its Influence on Liquidity and Returns of German Stocks
Date Written: August 27, 2010
Abstract
We show that the search volume on Google not only serves as an intuitive proxy for overall recognition in a firm, but also captures the attention of stock market investors. Our results suggest that an increase in search queries is associated with a rise in trading activity and stock liquidity. We attribute the improved liquidity to a reduction in asymmetric information costs and conclude that the search volume primarily measures the recognition of uninformed investors. Moreover we find evidence that an increase in search volume is associated with temporarily higher future returns, which reinforces our previous finding.
Keywords: Google Insights, stock liquidity, trading activity, stock returns
JEL Classification: G12, G14
Suggested Citation: Suggested Citation
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