Retail Investor Attention and Stock Liquidity
University of Warwick
University of Edinburgh - Business School
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
Date posted: March 20, 2011 ; Last revised: April 8, 2015
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