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Retail investor attention and stock liquidity

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  • Ding, Rong
  • Hou, Wenxuan

Abstract

We use the search volume index (SVI) of the stock ticker provided by Google Trends to capture the active attention that retail investors pay to stocks. Based on the analysis of S&P 500 stocks from 2004 to 2009, we show that the majority of the variation in SVI cannot be explained by passive attention measures, including Google News coverage and advertising expenditure. We find that retail investor attention, reflected by the level and change in SVI, significantly enlarges the shareholder base and improves stock liquidity. The results are robust to the control of endogeneity issues.

Suggested Citation

  • Ding, Rong & Hou, Wenxuan, 2015. "Retail investor attention and stock liquidity," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 37(C), pages 12-26.
  • Handle: RePEc:eee:intfin:v:37:y:2015:i:c:p:12-26
    DOI: 10.1016/j.intfin.2015.04.001
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:jbrese:v:87:y:2018:i:c:p:90-101 is not listed on IDEAS
    2. Jaroslav Bukovina, 2015. "Sentiment of a society and large-cap stock liquidity," MENDELU Working Papers in Business and Economics 2015-56, Mendel University in Brno, Faculty of Business and Economics.
    3. Ruan, Xinfeng & Zhang, Jin E., 2016. "Investor attention and market microstructure," Economics Letters, Elsevier, vol. 149(C), pages 125-130.
    4. repec:eee:riibaf:v:44:y:2018:i:c:p:532-546 is not listed on IDEAS
    5. repec:eee:pacfin:v:46:y:2017:i:pb:p:243-257 is not listed on IDEAS
    6. Tantaopas, Parkpoom & Padungsaksawasdi, Chaiyuth & Treepongkaruna, Sirimon, 2016. "Attention effect via internet search intensity in Asia-Pacific stock markets," Pacific-Basin Finance Journal, Elsevier, vol. 38(C), pages 107-124.

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