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Retail Investor Attention and Stock Liquidity

Rong Ding

University of Warwick

Wenxuan Hou

University of Edinburgh - Business School; European Corporate Governance Institute

April 7, 2015

Journal of International Financial Markets, Institutions and Money, Forthcoming

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 stocks. Based on the analysis of S&P 500 stocks 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 endogeneity issues.

Number of Pages in PDF File: 46

Keywords: Investors attention, breadth of ownership, liquidity, bid-ask spread, search volume index, media coverage, SVI, Google, Google Trends, Google News

JEL Classification: G10, G14

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Date posted: March 20, 2011 ; Last revised: April 8, 2015

Suggested Citation

Ding, Rong and Hou, Wenxuan, Retail Investor Attention and Stock Liquidity (April 7, 2015). Journal of International Financial Markets, Institutions and Money, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1786762 or http://dx.doi.org/10.2139/ssrn.1786762

Contact Information

Rong Ding
University of Warwick ( email )
Warwick Business School
University of Warwick
Coventry, CV4 7AL
United Kingdom
Wenxuan Hou (Contact Author)
University of Edinburgh - Business School ( email )
University of Edinburgh
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
United Kingdom
HOME PAGE: http://www.wenxuanhou.com
European Corporate Governance Institute ( email )
B-1050 Brussels
HOME PAGE: http://www.ecgi.org/members_directory/member.php?member_id=1417
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