Abstract
PurposeThe purpose of this paper is to investigate the impacts of investor attention on stock market activity.Design/methodology/approachThe authors employed the Google Search Volume (GSV) Index, a direct and non-traditional proxy for investor attention.FindingsThe results indicate a strong correlation between GSV and trading volume – a traditional measure of attention – proving the new measure’s reliability. In addition, market-wide attention increases both stock illiquidity and volatility, whereas company-level attention shows mixed results, driving illiquidity and volatility in both directions.Originality/valueTo the best of the authors’ knowledge, Nguyen and Pham’s (2018) study has been the only previous study identifying investor attention in Vietnam by using GSV as a proxy and examining the impacts of broad search terms about the macroeconomy on the stock market as a whole – on stock indices’ movements. The paper will contribute to this by quantifying GSV impacts on each stock individually.
Highlights
Classical economic models assume immediate incorporation of new information into asset price, which implies instantaneous mental processing of any information load (Da et al, 2011)
We examine 49 stock tickers included in VN-100 Index of Ho Chi Minh Stock Exchange (HOSE) as of January 1, 2019
This paper contribute to the strand of literature on Google Search Volume (GSV) and stock market first by providing evidence on Vietnam, a developing economy; and second, by quantifying the relationship between stock-specific performance and the attention paid on each stock individually, rather than search-based sentiment on Vietnam stock market as a whole, as previously examined by Nguyen and Pham (2018)
Summary
Classical economic models assume immediate incorporation of new information into asset price, which implies instantaneous mental processing of any information load (Da et al, 2011). Attention-grabbing stocks see increased trading volume and liquidity (Grullon et al, 2004; Aouadi et al, 2013) This effect stems from reduced asymmetric information costs which make prices less sensitive to a dollar traded, more pronounced among smaller firms which the market lack information about, or pay less attention to (Chemmanur and Yan, 2019; Bank et al, 2011). This includes trading volume (Barber and Odean, 2007; Chemmanur and Yan, 2019; Hou et al, 2009), extreme stock returns (Barber and Odean, 2007) and stock prices (Seasholes and Wu, 2007) Are these measures delayed in time, they are results of a combined effect from different economic factors unrelated to investor attention. Investor attention to the whole market increases individual stock volatility, due to uncertainty among many options
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