Google search volume and individual investor trading

Dimitrios Kostopoulos; Steffen Meyer; Charline Uhr

doi:10.1016/j.finmar.2020.100544

Google search volume and individual investor trading

Dimitrios Kostopoulos, Steffen Meyer^*, Charline Uhr

^*Corresponding author for this work

Research output: Contribution to journal › Journal article › Research › peer-review

Abstract

We relate Google search volumes, which are a proxy for the economic concerns of households (the FEARS index), to the trading behavior of approximately 100,000 individual German online-brokerage clients. We find that when the FEARS index is high, individual investors trade out of risky assets. Additionally, we find that the FEARS index has a negative short-horizon relation to stock market returns, which reverses over the following six days. This shows that the effect of economic concerns on the market is temporary, whereas on individual investors, the effect does not reverse within the next 20 days. In addition, we find that less sophisticated investors are more prone to sentiment.

Original language	English
Article number	100544
Journal	Journal of Financial Markets
Volume	49
ISSN	1386-4181
DOIs	https://doi.org/10.1016/j.finmar.2020.100544
Publication status	Published - Jun 2020

Keywords

Individual investor
Investor sentiment
Trading behavior

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10.1016/j.finmar.2020.100544

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title = "Google search volume and individual investor trading",

abstract = "We relate Google search volumes, which are a proxy for the economic concerns of households (the FEARS index), to the trading behavior of approximately 100,000 individual German online-brokerage clients. We find that when the FEARS index is high, individual investors trade out of risky assets. Additionally, we find that the FEARS index has a negative short-horizon relation to stock market returns, which reverses over the following six days. This shows that the effect of economic concerns on the market is temporary, whereas on individual investors, the effect does not reverse within the next 20 days. In addition, we find that less sophisticated investors are more prone to sentiment.",

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AU - Kostopoulos, Dimitrios

AU - Meyer, Steffen

AU - Uhr, Charline

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AB - We relate Google search volumes, which are a proxy for the economic concerns of households (the FEARS index), to the trading behavior of approximately 100,000 individual German online-brokerage clients. We find that when the FEARS index is high, individual investors trade out of risky assets. Additionally, we find that the FEARS index has a negative short-horizon relation to stock market returns, which reverses over the following six days. This shows that the effect of economic concerns on the market is temporary, whereas on individual investors, the effect does not reverse within the next 20 days. In addition, we find that less sophisticated investors are more prone to sentiment.

KW - Individual investor

KW - Investor sentiment

KW - Trading behavior

U2 - 10.1016/j.finmar.2020.100544

DO - 10.1016/j.finmar.2020.100544

M3 - Journal article

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SN - 1386-4181

VL - 49

JO - Journal of Financial Markets

JF - Journal of Financial Markets

M1 - 100544

ER -

Google search volume and individual investor trading

Abstract

Keywords

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