Stock market activity and Google Trends: the case of a developing economy

Abstract

Purpose – The purpose of this paper is to investigate the impacts of investor attention on stock market activity. Design/methodology/approach – The authors employed the Google Search Volume (GSV) Index, a direct and non-traditional proxy for investor attention. Findings – The results indicate a strong correlation between GSV and trading volume – a traditional measure of attention – proving the new measure’s reliability. In addition, market-wide attention increases both stock illiquidity and volatility, whereas company-level attention shows mixed results, driving illiquidity and volatility in both directions. Originality/value – To the best of the authors’ knowledge, Nguyen and Pham’s (2018) study has been the only previous study identifying investor attention in Vietnam by using GSV as a proxy and examining the impacts of broad search terms about the macroeconomy on the stock market as a whole – on stock indices’ movements. The paper will contribute to this by quantifying GSV impacts on each stock individually.

Keywords

• google trends
• search engine
• investor attention
• stock illiquidity
• stock volatility