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The Determinants of International Investment and Attention Allocation: Using Internet Search Query Data

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  • Jordi Mondria
  • Thomas Wu
  • Yi Zhang

Abstract

The challenge of evaluating asymmetric information theories relies on assessing the pieces of information investors decide to process. This paper overcomes such challenge exploring a unique dataset containing the "search/click-through" behavior of internet search engine users. We analyze the relationship between attention allocation and international investment decisions by combining U.S. data on portfolio holdings of foreign securities with the attention allocated by America Online customers in search queries towards these countries. We find evidence that: (i) agents tend to search more information about countries where they hold more assets, and (ii) agents tend to invest more in countries where they process more information.

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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-326.

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Length: 29 pages
Date of creation: 08 Aug 2008
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-326

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Keywords: Foreign Asset Holdings; Attention Allocation ; Internet Search Query.;

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References

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Citations

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Cited by:
  1. Gao, Lei & Mei, Bin, 2013. "Investor attention and abnormal performance of timberland investments in the United States," Forest Policy and Economics, Elsevier, vol. 28(C), pages 60-65.
  2. Habib, Maurizio Michael & Stracca, Livio, 2013. "Foreign investors and risk shocks: seeking a safe haven or running for the exit?," Working Paper Series 1609, European Central Bank.
  3. Andreas M. Hefti, 2011. "Attention competition," ECON - Working Papers 028, Department of Economics - University of Zurich.
  4. Rose, Andrew K & Spiegel, Mark, 2011. "Dollar Illiquidity and Central Bank Swap Arrangements During the Global Financial Crisis," CEPR Discussion Papers 8557, C.E.P.R. Discussion Papers.
  5. Amal Aouadi & Mohamed Arouri & Frédéric Teulon, 2014. "Investor attention and stock market activity: Evidence from France," Working Papers 2014-405, Department of Research, Ipag Business School.
  6. Glick, Reuven & Hutchison, Michael, 2013. "China's financial linkages with Asia and the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 186-206.
  7. Joshua Aizenman & Mahir Binici & Michael M. Hutchison, 2014. "The Transmission of Federal Reserve Tapering News to Emerging Financial Markets," NBER Working Papers 19980, National Bureau of Economic Research, Inc.
  8. Ladislav Kristoufek, 2013. "Can Google Trends search queries contribute to risk diversification?," Papers 1310.1444, arXiv.org.
  9. Vozlyublennaia, Nadia, 2014. "Investor attention, index performance, and return predictability," Journal of Banking & Finance, Elsevier, vol. 41(C), pages 17-35.
  10. Jordi Mondria & Thomas Wu, 2012. "Familiarity and Surprises in International Financial Markets: Bad news travels like wildfire, good news travels slow," 2012 Meeting Papers 50, Society for Economic Dynamics.
  11. Sofía B. Ramos & Helena Veiga & Pedro Latoeiro, 2013. "Predictability of stock market activity using Google search queries," Statistics and Econometrics Working Papers ws130605, Universidad Carlos III, Departamento de Estadística y Econometría.
  12. Eichler, Stefan, 2012. "Limited investor attention and the mispricing of American Depositary Receipts," Economics Letters, Elsevier, vol. 115(3), pages 490-492.
  13. Eichler, Stefan, 2012. "Equity home bias and corporate disclosure," Journal of International Money and Finance, Elsevier, vol. 31(5), pages 1008-1032.
  14. Thomas Wu & Jordi Mondria, 2011. "Asymmetric Attention and Stock Returns," 2011 Meeting Papers 134, Society for Economic Dynamics.

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