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

Posted: 29 Aug 2011

See all articles by Matthias Bank

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: July 9, 2011

Abstract

We show that search volume on Google not only serves as an intuitive proxy for overall firm recognition, 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 search volume primarily measures attention from 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 (July 9, 2011). Financial Markets and Portfolio Management, Vol. 25, No. 3, pp. 239-264, 2011, Available at SSRN: https://ssrn.com/abstract=1918769

Matthias Bank (Contact Author)

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Martin Larch

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Georg Peter

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, Innsbruck 6020
Austria

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
852
PlumX Metrics