Investor attention and stock returns: Evidence from Borsa Istanbul

Abstract

This paper constructs a novel measure of direct firm specific investor attention using abnormal Google search volume index (ASVI) towards stocks in Turkey. In sample of BIST all shares index stocks over the period April 2013 and September 2017, we find that ASVI is likely to capture investor attention among other indirect measures of investor attention. We find that firms attracting abnormally high attention earn higher returns and the price pressure effect of ASVI is stronger among small stocks. The predictability of searches for abnormal return persists three weeks and ultimate price reversal occurs within a year. We show that forming a portfolio sorting by attention levels and trading strategy with long position in high attention stocks and short position in low attention stocks creates a significant return premium. Our results reveal that stock prices tend to be driven by the behavioral factors due to the investor attention in Turkey. Keywords: Investor attention, Google search volume, Stock returns, Trading activity, JEL classification: G12, G14, G15