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Google Search Volume and its Influence on Liquidity and Returns of German StocksMatthias BankUniversity of Innsbruck Martin LarchUniversity of Innsbruck Georg PeterUniversity of Innsbruck August 27, 2010 Financial Markets and Portfolio Management, Vol. 25, No. 3, pp. 239-264, 2011 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.
Number of Pages in PDF File: 30 Keywords: Google Insights, stock liquidity, trading activity, stock returns JEL Classification: G12, G14 Accepted Paper SeriesDate posted: August 28, 2010 ; Last revised: August 4, 2011Suggested CitationContact Information
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