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Investor attention and short-term return reversals

Author

Listed:
  • Heyman, Dries
  • Lescrauwaet, Michiel
  • Stieperaere, Hannes

Abstract

The Google Search Volume Index is proposed as a novel and improved proxy for overreaction as selling winner stocks after they enjoyed a substantial surge in search volume is found to be profitable. It increases the gains of a standard reversal strategy, net of transaction costs, from 17.5 basis points to 34.2 basis points on a weekly basis, corresponding to a 9.1% increase on an annual basis. Furthermore, we report significant alphas in Fama–French-type regressions. The results suggest that most of the reversal profits are made in volatile times, which are typically periods when overreaction is most likely.

Suggested Citation

  • Heyman, Dries & Lescrauwaet, Michiel & Stieperaere, Hannes, 2019. "Investor attention and short-term return reversals," Finance Research Letters, Elsevier, vol. 29(C), pages 1-6.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:1-6
    DOI: 10.1016/j.frl.2019.03.003
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • 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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