Google Searches and Stock Returns

17 Pages Posted: 31 Mar 2016

See all articles by Laurens Bijl

Laurens Bijl

Norwegian University of Science and Technology (NTNU)

Glenn Kringhaug

Norwegian University of Science and Technology (NTNU)

Peter Molnár

University of Stavanger

Eirik Sandvik

Norwegian University of Science and Technology (NTNU)

Date Written: March 30, 2016

Abstract

We investigate whether data from Google Trends can be used to forecast stock returns. Previous studies have found that high Google search volumes predict high returns for the first one to two weeks, with subsequent price reversal. By using a more recent dataset that covers the period from 2008 to 2013 we find that high Google search volumes lead to negative returns. We also examine a trading strategy based on selling stocks with high Google search volumes and buying stocks with infrequent Google searches. This strategy is profitable when the transaction cost is not taken into account but is not profitable if we take into account transaction costs.

Keywords: Google search, stock returns

JEL Classification: G10

Suggested Citation

Bijl, Laurens and Kringhaug, Glenn and Molnár, Peter and Sandvik, Eirik, Google Searches and Stock Returns (March 30, 2016). International Review of Financial Analysis, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2756370

Laurens Bijl

Norwegian University of Science and Technology (NTNU) ( email )

Trondheim NO-7491
Norway

Glenn Kringhaug

Norwegian University of Science and Technology (NTNU) ( email )

Trondheim NO-7491
Norway

Peter Molnár (Contact Author)

University of Stavanger ( email )

UiS Business School
Stavanger, 4036
Norway

Eirik Sandvik

Norwegian University of Science and Technology (NTNU) ( email )

Trondheim NO-7491
Norway

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