The Relationship between Investor Attention and Stock Markets: An Application on ISE-100 Index

The most of theoretical financial models that have been used in the literature depend on the conceptual terms such as information, information flow, information supply and demand for information. It is well known that investors take into account information about market and company in the process of investment decision. In this context, there have been extensive studies that focus on the relation between investors' relation and financial markets and different proxy variables for measuring investors' relation have been used in the literature due to investors' relation cannot be directly measure. The aim of this study is to examine the empirical relation between investor attention and stock market empirically. In order to determine the investor attention toward stock market, Google search queries statistics are employed. Differently from existing literature, the relationship between investor attention and stock market is analyzed in terms of stock returns and volumes by means of causality in mean and variance test suggested by Hong (2001). Empirical findings suggest weak causal link going from investors’ attention to stock returns. On the other hand, stock volume is found to be Granger cause of investors’ relation.