Abstract

http://ssrn.com/abstract=1941680
 
 

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Can Internet Search Queries Help to Predict Stock Market Volatility?


Thomas Dimpfl


University of Tuebingen - Department of Statistics and Econometrics

Stephan Jank


University of Cologne - Centre for Financial Research (CFR); Frankfurt School of Finance & Management gemeinnützige GmbH

June 6, 2012

Paris December 2012 Finance Meeting EUROFIDAI-AFFI Paper

Abstract:     
This paper studies the dynamics of stock market volatility and retail investors' attention to the stock market, where attention to the stock market is measured by internet search queries related to the leading stock market index. We find a strong co-movement of the Dow Jones' realized volatility and the volume of search queries for its name. Furthermore, search queries Granger cause volatility: a heightened number of searches today is followed by an increase in volatility tomorrow. We utilize this finding to improve several models of realized volatility. Including search queries in autoregressive models of realized volatility helps to improve volatility forecasts in-sample and out-of-sample as well as for different forecasting horizons. Search queries are particularly useful in high-volatility phases when a precise prediction is vital.

Number of Pages in PDF File: 34

Keywords: realized volatility, forecasting, investor behavior, limited attention, noise trader, search engine data

JEL Classification: G10, G14, G17

working papers series


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Date posted: October 10, 2011 ; Last revised: October 17, 2012

Suggested Citation

Dimpfl, Thomas and Jank, Stephan, Can Internet Search Queries Help to Predict Stock Market Volatility? (June 6, 2012). Paris December 2012 Finance Meeting EUROFIDAI-AFFI Paper. Available at SSRN: http://ssrn.com/abstract=1941680 or http://dx.doi.org/10.2139/ssrn.1941680

Contact Information

Thomas Dimpfl
University of Tuebingen - Department of Statistics and Econometrics ( email )
Germany
Stephan Jank (Contact Author)
University of Cologne - Centre for Financial Research (CFR) ( email )
Albertus-Magnus Platz
Cologne, 50923
Germany
Frankfurt School of Finance & Management gemeinnützige GmbH ( email )
Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany
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