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Google Search Volume and its Influence on Liquidity and Returns of German Stocks

Financial Markets and Portfolio Management, Vol. 25, No. 3, pp. 239-264, 2011

30 Pages Posted: 28 Aug 2010 Last revised: 10 Aug 2014

Matthias Bank

University of Innsbruck

Martin Larch

University of Innsbruck

Georg Peter

University of Innsbruck

Multiple version iconThere are 2 versions of this paper

Date Written: August 27, 2010

Abstract

We show that the search volume on Google not only serves as an intuitive proxy for overall recognition in a firm, but also captures the attention of stock market investors. Our results suggest that an increase in search queries is associated with a rise in trading activity and stock liquidity. We attribute the improved liquidity to a reduction in asymmetric information costs and conclude that the search volume primarily measures the recognition of uninformed investors. Moreover we find evidence that an increase in search volume is associated with temporarily higher future returns, which reinforces our previous finding.

Keywords: Google Insights, stock liquidity, trading activity, stock returns

JEL Classification: G12, G14

Suggested Citation

Bank, Matthias and Larch, Martin and Peter, Georg, Google Search Volume and its Influence on Liquidity and Returns of German Stocks (August 27, 2010). Financial Markets and Portfolio Management, Vol. 25, No. 3, pp. 239-264, 2011. Available at SSRN: https://ssrn.com/abstract=1666763

Matthias Bank

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Martin Larch

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Georg Peter (Contact Author)

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

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