Google Search Volume and Individual Investor Trading

41 Pages Posted: 6 Aug 2016 Last revised: 14 Oct 2018

See all articles by Dimitrios Kostopoulos

Dimitrios Kostopoulos

Leibniz Universität Hannover

Steffen Meyer

University of Southern Denmark - Department of Business and Economics; Danish Finance Institute

Date Written: September 27, 2018

Abstract

We relate Google search volumes, proxying for economic concerns of households (FEARS), to individual investor trading. The trading data come from a large German brokerage covering more than 100 thousand investors over ten years. When FEARS is high, individual investors are on the sell side of the market, particularly trading out of risky assets. This effect continues over the following days. Additionally, we find FEARS to have a negative short-horizon impact on stock market returns, which reverses over the following six days. This shows that the effect of sentiment on the market is temporary, while on individual investors it is permanent. In subsample analyses, we find results that are consistent with the theoretical prediction that less sophisticated investors are more prone to sentiment.

Keywords: individual investor; trading behavior; investor sentiment

JEL Classification: D03, D14, G02; G11

Suggested Citation

Kostopoulos, Dimitrios and Meyer, Steffen, Google Search Volume and Individual Investor Trading (September 27, 2018). Available at SSRN: https://ssrn.com/abstract=2818939 or http://dx.doi.org/10.2139/ssrn.2818939

Dimitrios Kostopoulos

Leibniz Universität Hannover ( email )

Königsworther Platz 1
Hannover, 30167
Germany

Steffen Meyer (Contact Author)

University of Southern Denmark - Department of Business and Economics ( email )

DK-5230 Odense
Denmark

Danish Finance Institute ( email )

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