Abstract

http://ssrn.com/abstract=1786762
 
 

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Retail Investor Attention and Stock Liquidity


Rong Ding


University of Southampton

Wenxuan Hou


University of Edinburgh - Business School; European Corporate Governance Institute

March 1, 2013


Abstract:     
We use the search volume index (SVI) of stock ticker provided by Google Trends to capture the retail investor’s active attention on the S&P 500 stocks by following Da, Engelberg, and Gao (2011). Based on the analysis of data between January 2004 and December 2009, we show that the majority of the cross-sectional variation of SVI cannot be explained by the passive attention measures including online media coverage from Google News and advertising expenditures. We further find that firms with increased retail investor attention, reflected by the level and the change of SVI, are associated with a larger shareholder base and with significantly improved stock liquidity. The results are robust to the control of firm-specific characteristics that affect stock liquidity, and year and industry fixed effects. Our results remain consistent to alternative measures of stock liquidity. 【First version: 23 Jan 2011】

Number of Pages in PDF File: 34

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

working papers series


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Date posted: March 20, 2011 ; Last revised: April 30, 2013

Suggested Citation

Ding, Rong and Hou, Wenxuan, Retail Investor Attention and Stock Liquidity (March 1, 2013). Available at SSRN: http://ssrn.com/abstract=1786762 or http://dx.doi.org/10.2139/ssrn.1786762

Contact Information

Rong Ding
University of Southampton ( email )
Highfield Campus
Southampton, SO17 1BJ
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 )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org/members_directory/member.php?member_id=1417
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