Is Big Brother Watching Us? Google, Investor Sentiment and the Stock Market
Economics Bulletin, Forthcoming
13 Pages Posted: 6 Dec 2012 Last revised: 19 Oct 2013
Date Written: December 6, 2012
This paper proposes a novel measure of French investor sentiment based on the volume of internet search reported by Google Trends. We find that our sentiment indicator correlates well with alternative sentiment measures often used in the literature. Furthermore, we find that investor sentiment influences the behavior of mutual fund investors. The results also reveal evidence about short-run predictability in return. An increase in our sentiment index leads to short-term return reversal. The reversal pattern is more pronounced for smaller firms than larger firms, consistent with the predictions of noise trader’s models.
Keywords: Google Trends, investor sentiment, stock returns
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