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Editor: Universidad Carlos III de Madrid. Departamento de Estadística

Issued date: 2013-03

Serie-No.: UC3M Working papers. Statistics and Econometrics13-05

Keywords: Behavioral Finance , Google Search Volume Index , Investor Attention , Predictability

JEL Classification: G02

Rights: Atribución-NoComercial-SinDerivadas 3.0 España

Abstract:This paper analyzes whether web search queries predict stock market activity in asample of the largest European stocks. We provide evidence that i an increase in websearches for stocks on Google engine is followed by a temporary increase in volatilityanThis paper analyzes whether web search queries predict stock market activity in asample of the largest European stocks. We provide evidence that i an increase in websearches for stocks on Google engine is followed by a temporary increase in volatilityand volume and a drop in cumulative returns. ii An increase for web search queries forthe market index leads to a decrease in the returns of the index as well as of the stockindex futures and an increase in implied volatility. iii Attention interacts withbehavioral biases. The predictability of web searches for return and liquidity isenhanced when firm prices and market prices hit a 52-week high and diminished whenthe market hits a 52-week low. iv Investors tend to process more market informationthan firm specific information in investment decisions, confirming limited attentiontheory.+-





Author: Latoeiro, Pedro; Ramos, Sofía B.; Veiga, Helena

Source: http://e-archivo.uc3m.es


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Universidad Carlos III de Madrid Repositorio institucional e-Archivo http:--e-archivo.uc3m.es Departamento de Estadística DES - Working Papers.
Statistics and Econometrics.
WS 2013-03 Predictability of stock market activity using Google search queries Latoeiro, Pedro http:--hdl.handle.net-10016-16514 Descargado de e-Archivo, repositorio institucional de la Universidad Carlos III de Madrid Working Paper 13-06 Statistics and Econometrics Series 05 March 2013 Departamento de Estadística Universidad Carlos III de Madrid Calle Madrid, 126 28903 Getafe (Spain) Fax (34) 91 624-98-48 Predictability of stock market activity using Google search queries Pedro Latoeiro1, Sofia B.
Ramos2 and Helena Veiga3 Abstract This paper analyzes whether web search queries predict stock market activity in a sample of the largest European stocks.
We provide evidence that i) an increase in web searches for stocks on Google engine is followed by a temporary increase in volatility and volume and a drop in cumulative returns.
ii) An increase for web search queries for the market index leads to a decrease in the returns of the index as well as of the stock index futures and an increase in implied volatility.
iii) Attention interacts with behavioral biases.
The predictability of web searches for return and liquidity is enhanced when firm prices and market prices hit a 52-week high and diminished when the market hits a 52-week low.
iv) Investors tend to process more market information than firm specific information in investment decisions, confirming limited attention theory. Keywords: Behavioral Finance; Google Search Volume Index; Investor Attention; Predictability. 1 Pedro Latoeiro, Instituto Universitario de Lisboa (ISCTE-IUL), Avenida das For-c cas Armadas, 1600083 Lisboa, Portugal. 2 Sofia B.
Ramos, Business Research Center-UNIDE, Lisbon University Institute (ISCTE-IUL), Avenida das Forças Armadas, 1600-083 Lisboa, Portugal.
Email: sofia.ramos@iscte.pt.
Corresponding author. 3 He...





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