In Search of Attention
We propose a new and direct measure of investor attention using search frequency in Google(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 two 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. Our results provide direct support for Barber and Odeanís (2008) price pressure hypothesis and highlight the usefulness of search data which can reveal investor interests.
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