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

See all articles by Francisca Beer

Francisca Beer

California State University, San Bernardino

Fabrice Hervé

Université de Bourgogne - CREGO - UBFC

Mohamed Zouaoui

University of Burgundy

Date Written: December 6, 2012

Abstract

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

Suggested Citation

Beer, Francisca and Hervé, Fabrice and Zouaoui, Mohamed, Is Big Brother Watching Us? Google, Investor Sentiment and the Stock Market (December 6, 2012). Economics Bulletin, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2185979 or http://dx.doi.org/10.2139/ssrn.2185979

Francisca Beer

California State University, San Bernardino ( email )

5500 University Parkway
San Bernardino, CA 92407
United States

Fabrice Hervé

Université de Bourgogne - CREGO - UBFC ( email )

2 Bd Gabriel
21 000 DIJON
France

Mohamed Zouaoui (Contact Author)

University of Burgundy ( email )

2 Bd Gabriel
B.P. 26 611 21066 DIJON Cedex
United States

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