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Stock returns and Google Search volume data – an analysis on the Portuguese and American market
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Resumo(s)
This paper examines the forecasting power of Google Search Volume Data on market returns in
the light of Behavioral Finance. The research is twofold: we investigate the ability of investor
attention as well as investor sentiment to predict future returns. We consider weekly time series
data from 2008 to 2018 for two American market indices and the Portuguese market. Investor
attention is captured by search volume of the index’s names, i.e. DJIA, S&P500 and PSI20.
Investor sentiment is simulated robustly by constructing two modified sentiment indices. We apply
VAR models and Granger Causality and show that our proxies for investor attention do not provide
significant forecasting information opposite to previous research. Similarly, investor sentiment
indices constructed with English searched terms cannot predict market returns. However, both
investor sentiment indices constructed with Portuguese words reveal significant precedence.
Descrição
Palavras-chave
Investor attention Investor sentiment Forecasting returns Google SVI