Retail Investor Attention and Stock Liquidity
University of Southampton
University of Edinburgh - Business School; European Corporate Governance Institute
October 1, 2014
We use the search volume index (SVI) of the stock ticker provided by Google Trends to capture the active attention that retail investors pay to the S&P 500 stocks. Based on the analysis of data from 2004 to 2009, we show that the majority of the variation in SVI cannot be explained by passive attention measures, including Google News coverage and advertising expenditure. We find that retail investor attention, reflected by the level and change in SVI, significantly enlarges the shareholder base and improves stock liquidity. The results are robust to the control of selection effects with propensity score matching.
Number of Pages in PDF File: 43
Keywords: Investors attention, breadth of ownership, liquidity, bid-ask spread, search volume index, media coverage, SVI, Google, Google Trends, Google News
JEL Classification: G10, G14working papers series
Date posted: March 20, 2011 ; Last revised: October 8, 2014
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