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

University of Southern Denmark
Goethe University Frankfurt

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

Funding

We would like to thank Noah Stoffman, Per ?stberg, as well as seminar participants of the Spring Meeting of Young Economists (SMYE) 2018, the German Finance Association (DGF) 2017, the Behavioral Finance Working Group Conference (BFWG) 2017, the European Retail Investment Conference (ERIC) 2017, and the SAFE Household Finance Workshop 2016. We would also like to thank our research assistant Ricarda Pl?mpe for outstanding assistance in construction of the FEARS index for the German market. We gratefully acknowledge research support from the Research Center SAFE, funded by the State of Hessen initiative for research LOEWE. This research would not have been possible without the collaboration of a German bank. We gratefully acknowledge their data provision. We thank this bank and all its employees who helped us. The views expressed in this paper are those of the authors and do not necessarily reflect the views of any institution.

Keywords

Individual investor
Investor sentiment
Trading behavior

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10.1016/j.finmar.2020.100544

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AU - Meyer, Steffen

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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

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DO - 10.1016/j.finmar.2020.100544

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JO - Journal of Financial Markets

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Google search volume and individual investor trading

Abstract

Funding

Keywords

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