Collective Attention and Stock Prices: Evidence from Google Trends Data on Standard and Poor's 100

Raphael H Heiberger

PLOS ONE, 2015, vol. 10, issue 8, 1-14

Abstract: Today´s connected world allows people to gather information in shorter intervals than ever before, widely monitored by massive online data sources. As a dramatic economic event, recent financial crisis increased public interest for large companies considerably. In this paper, we exploit this change in information gathering behavior by utilizing Google query volumes as a "bad news" indicator for each corporation listed in the Standard and Poor´s 100 index. Our results provide not only an investment strategy that gains particularly in times of financial turmoil and extensive losses by other market participants, but reveal new sectoral patterns between mass online behavior and (bearish) stock market movements. Based on collective attention shifts in search queries for individual companies, hence, these findings can help to identify early warning signs of financial systemic risk. However, our disaggregated data also illustrate the need for further efforts to understand the influence of collective attention shifts on financial behavior in times of regular market activities with less tremendous changes in search volumes.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0135311

DOI: 10.1371/journal.pone.0135311

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