Google search as a measure investor attention : Its influence on stocks and IPOs in U.S.

Abstract

The purpose of this thesis is to investigate new method of retail investor attention by using Google Search Volume Index (SVI) in determining its effect on stocks trading activity, volatility and extend the analysis by incorporating first-day IPO returns. I perform three unique analyses to gauge the relevance of Google search Index as a measure of investor attention. Firstly I examine S&P-500 index overall. Secondly, I measure the effects of SVI on week ahead volume traded on all the stocks listed on Dow30 index. Finally I extend my analysis to include IPOs by examining the effect of SVI on first-day IPO returns. The data used is taken from the start of the year in 2006 till the end of the year in 2013 except for the IPO analysis. The results obtained in this study indicate that Google search query is a reliable proxy to measure attention of retail investors in the short-run. An increase in search queries is associated with a rise in trading activity, volatility and higher first-day IPO returns