46 Pages Posted: 20 Mar 2011 Last revised: 8 Apr 2015
Date Written: April 7, 2015
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.
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
Suggested Citation: 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: https://ssrn.com/abstract=1786762 or http://dx.doi.org/10.2139/ssrn.1786762