Finding the Risk-Return Trade-Off With Google

37 Pages Posted: 25 Jul 2020

See all articles by Pedro Piccoli

Pedro Piccoli

Universidade Católica do Paraná (Universidade Católica do Paraná)

Date Written: July 1, 2020


Investor attention is central to explaining the mean-variance puzzle. Using Google Search Volumes as a proxy to attention, I document a positive trade-off during low attention periods that is significantly undermined when attention is high. The negative association between on-line searches and the trade-off is also present in the time-varying analysis. I also find that this deterioration can be explained by the escalation of risk brought about by the entry of retail investors into the market. The results are robust for several alternative explanations, such as data periodicity, conditional variance measures, on-line search terminologies and macroeconomic variables, and provide further support for the importance of noise-traders to stock market inefficiency.

Keywords: Risk-Return Trade-Off, Investor Attention, Google Trends, Noise Trader Approach

JEL Classification: G10, G12, G14

Suggested Citation

Piccoli, Pedro, Finding the Risk-Return Trade-Off With Google (July 1, 2020). Available at SSRN: or

Pedro Piccoli (Contact Author)

Universidade Católica do Paraná (Universidade Católica do Paraná) ( email )

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