Investor Attention in Financial Markets: The Effect of Google Search Volume on Abnormal Returns

Abstract

In this study I explore the relationship between Google search volume and abnormal returns in the United States stock market. Over a period of 12 years, I found a positive relationship between these two variables and conclude that the Price Pressure Hypothesis not only exists in the United States stock market but also is the mechanism behind this relationship. I also claim that the size of a firm has an impact on this relationship however my results were mixed. There was more evidence in favor of this idea than against however I suggest that further research should be performed on this topic in order to verify my positive results. Lastly, I examine the amount of time it takes for Google search volume to effect abnormal returns. I was able to determine that Google search volume takes less than one week to effect abnormal returns however, I was not able to determine the exact amount of time.