Investor Attention and Equity as a Hedge against Inflation in Ghana

Abstract

The flow of relevant market information for investment decision making has increased due to increase in access. Investors are, however, time-constrained in effort and cognitive resources to process market information. The basic capital asset pricing model based on the efficient market hypothesis assumes that all market information on securities is incorporated into prices instantaneously. However, the situation is different in real-life situations because, in some cases, some investors possess little information about the market. This study examined the effect of active investor attention (Google Search Volume) and inflation on Ghana’s stock market returns for the period September 2005-December 2019 (monthly data). Through co-integration and the VECM technique, we established a long-run relationship among the variables. The study also found a positive and significant relationship between active investor attention (Google Search Volume), inflation, and equity returns in Ghana. The results from the VECM are further confirmed by ARCH and GARCH models as a robustness check. The findings demonstrate that in Ghana, equity serves as a hedge against inflation.