In Search of Attention

  • Author(s): ZHI DA, JOSEPH ENGELBERG, PENGJIE GAO
  • Published: Sep 21, 2011
  • Pages: 1461-1499
  • DOI: 10.1111/j.1540-6261.2011.01679.x

ABSTRACT

We propose a new and direct measure of investor attention using search frequency in Google (Search Volume Index (SVI)). In a sample of Russell 3000 stocks from 2004 to 2008, we find that SVI (1) is correlated with but different from existing proxies of investor attention; (2) captures investor attention in a more timely fashion and (3) likely measures the attention of retail investors. An increase in SVI predicts higher stock prices in the next 2 weeks and an eventual price reversal within the year. It also contributes to the large first‐day return and long‐run underperformance of IPO stocks.

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