Investor attention and short-term return reversals

Dries Heyman, Michiel Lescrauwaet and Hannes Stieperaere

Finance Research Letters, 2019, vol. 29, issue C, 1-6

Abstract: The Google Search Volume Index is proposed as a novel and improved proxy for overreaction as selling winner stocks after they enjoyed a substantial surge in search volume is found to be profitable. It increases the gains of a standard reversal strategy, net of transaction costs, from 17.5 basis points to 34.2 basis points on a weekly basis, corresponding to a 9.1% increase on an annual basis. Furthermore, we report significant alphas in Fama–French-type regressions. The results suggest that most of the reversal profits are made in volatile times, which are typically periods when overreaction is most likely.

Keywords: Price reversals; Investor attention; Investor overreaction; Google trends (search for similar items in EconPapers)
JEL-codes: G02 G11 G12 G14 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:29:y:2019:i:c:p:1-6

DOI: 10.1016/j.frl.2019.03.003

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