Abstract
This study shows how correlated information consumption (CIC) of retail investors relates to comovement in stock market outcomes. We construct clusters of stocks with CIC by employing network analysis on Google co-search data. We predict significant comovement in returns and liquidity of stocks within the resultant clusters. This comovement is linked but not entirely explained by the similarity of prominent determinants in which pairs of stocks are connected through shared mutual fund holdings, industries, and companies’ locations. This evidence suggests this comovement is in excess of what rational sources predict and the findings have important implications for portfolio optimization.
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