Searching for returns - Investor attention in the Nordic stock market
Saario, Anna (2017)
Saario, Anna
2017
Kuvaus
Opinnäytetyö kokotekstinä PDF-muodossa.
Tiivistelmä
During the most recent decade, several studies have found the applicability of Google search volume information to research. In financial market research, the relationship between Google search volumes and stock returns has gathered interest. The studies suggest that the search volume of firm name or ticker can be used as a measure of attention investor pays to a stock. The impact of attention is two-way: in the short run increased attention has been found to increase the returns, but in the long run it tends to revert. Similarly, increased attention has been found to increase volatility. This study aims to examine the impact of investor attention on returns and volatilities of Nordic stocks. Google search volume is used as a proxy of investor attention.
The sample of this study consists of 52 stocks traded in NASDAQ OMX and the Google search volumes of the names of these companies in three Nordic countries: Finland, Sweden and Denmark during the sample period 2004-2016. Investigating the relationship between investor attention and stock returns and the impact of investor attention on stock volatility, simple OLS regression is used. Furthermore, the sample is split into two parts to find out whether the recent financial crisis has affected the results. The direction of causation and the timing of the effect are studied using Granger causality tests and VAR model.
The results suggest that in the Nordic market investor attention measured by Google search volume is not a factor that affects stock returns at least in the short run. The state of the economy does not have effect on the magnitude or significance of the results. However, investor attention has impact, albeit low in magnitude, on the volatility of the stock by including more information in the prices or reducing uncertainty. There are not prominent differences in results between Nordic countries in the sample, but the attention effect to the returns can be seen slightly more among Swedish stocks than in Finnish and Danish stocks.
The sample of this study consists of 52 stocks traded in NASDAQ OMX and the Google search volumes of the names of these companies in three Nordic countries: Finland, Sweden and Denmark during the sample period 2004-2016. Investigating the relationship between investor attention and stock returns and the impact of investor attention on stock volatility, simple OLS regression is used. Furthermore, the sample is split into two parts to find out whether the recent financial crisis has affected the results. The direction of causation and the timing of the effect are studied using Granger causality tests and VAR model.
The results suggest that in the Nordic market investor attention measured by Google search volume is not a factor that affects stock returns at least in the short run. The state of the economy does not have effect on the magnitude or significance of the results. However, investor attention has impact, albeit low in magnitude, on the volatility of the stock by including more information in the prices or reducing uncertainty. There are not prominent differences in results between Nordic countries in the sample, but the attention effect to the returns can be seen slightly more among Swedish stocks than in Finnish and Danish stocks.