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Power-law correlations in finance-related Google searches, and their cross-correlations with volatility and traded volume: Evidence from the Dow Jones Industrial components

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  • Ladislav Kristoufek

Abstract

We study power-law correlations properties of the Google search queries for Dow Jones Industrial Average (DJIA) component stocks. Examining the daily data of the searched terms with a combination of the rescaled range and rescaled variance tests together with the detrended fluctuation analysis, we show that the searches are in fact power-law correlated with Hurst exponents between 0.8 and 1.1. The general interest in the DJIA stocks is thus strongly persistent. We further reinvestigate the cross-correlation structure between the searches, traded volume and volatility of the component stocks using the detrended cross-correlation and detrending moving-average cross-correlation coefficients. Contrary to the universal power-law correlations structure of the related Google searches, the results suggest that there is no universal relationship between the online search queries and the analyzed financial measures. Even though we confirm positive correlation for a majority of pairs, there are several pairs with insignificant or even negative correlations. In addition, the correlations vary quite strongly across scales.

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  • Ladislav Kristoufek, 2015. "Power-law correlations in finance-related Google searches, and their cross-correlations with volatility and traded volume: Evidence from the Dow Jones Industrial components," Papers 1502.00225, arXiv.org.
    • Handle: RePEc:arx:papers:1502.00225
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    7. Aharon, David Y. & Qadan, Mahmoud, 2018. "What drives the demand for information in the commodity market?," Resources Policy, Elsevier, vol. 59(C), pages 532-543.
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    10. Fan, Xiaoqian & Yuan, Ying & Zhuang, Xintian & Jin, Xiu, 2017. "Long memory of abnormal investor attention and the cross-correlations between abnormal investor attention and trading volume, volatility respectively," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 469(C), pages 323-333.
    11. Mišečka, Tomáš & Ciaian, Pavel & Rajčániová, Miroslava & Pokrivčák, Jan, 2019. "In search of attention in agricultural commodity markets," Economics Letters, Elsevier, vol. 184(C).
    12. Zhang, Wei & Wang, Pengfei & Li, Xiao & Shen, Dehua, 2018. "Quantifying the cross-correlations between online searches and Bitcoin market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 509(C), pages 657-672.
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    14. Zhang, Wei & Wang, Pengfei & Li, Xiao & Shen, Dehua, 2018. "The inefficiency of cryptocurrency and its cross-correlation with Dow Jones Industrial Average," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 510(C), pages 658-670.

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