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Web search volume acceleration and cross-sectional returns

Author

Listed:
  • Yang, Baochen
  • Duan, Xianli
  • Ma, Yao

Abstract

This study examines the effect of web search volume acceleration (WSVA) on predicting future stock returns. We find that WSVA can significantly and negatively predict future stock returns in the Chinese stock market. After controlling for firm characteristics and changing the WSVA measurement, the negative return predictability of WSVA is still significant, and WSVA provides more predictive information than is contained in the web search volume speed (WSVS). Our empirical results are unable to be explained by existing common risk factors. We find that the return predictability of WSVA becomes stronger for stocks that grab higher investor attention, during higher investor sentiment period, and for stocks that face higher limits of arbitrage, which supports for stock mispricing theory in behavioral finance.

Suggested Citation

  • Yang, Baochen & Duan, Xianli & Ma, Yao, 2023. "Web search volume acceleration and cross-sectional returns," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001927
    DOI: 10.1016/j.ribaf.2023.102066
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    More about this item

    Keywords

    Web search volume acceleration; Cross-sectional returns; Mispricing; Return predictability;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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