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Information demand and stock market liquidity: International evidence

Author

Listed:
  • Amal Aouadi

    (RIME-Lab - Recherche Interdisciplinaire en Management et Économie Lab - ULR 7396 - UA - Université d'Artois - Université de Lille)

  • Mohamed Arouri

    (GRM - Groupe de Recherche en Management - EA 4711 - UNS - Université Nice Sophia Antipolis (1965 - 2019) - UniCA - Université Côte d'Azur)

  • David Roubaud

    (MRM - Montpellier Research in Management - UPVM - Université Paul-Valéry - Montpellier 3 - UPVD - Université de Perpignan Via Domitia - Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School - UM - Université de Montpellier, Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School)

Abstract

The aim of this paper is to investigate whether information demand is a significant determinant of stock liquidity. For a large sample of 209 firms from 7 countries over the 2004–2014 period, we show that information demand, as proxied by daily search volume in Google, is positively associated with stock market liquidity. Most importantly, this relationship is found to be shaped by the firm's overall visibility and information asymmetry levels. We test the robustness of our results by employing different estimation methods and alternative proxies. Thus, it may be that investors and managers who are concerned with stock liquidity should consider investor information demand in addition to specific investment fundamentals.

Suggested Citation

  • Amal Aouadi & Mohamed Arouri & David Roubaud, 2018. "Information demand and stock market liquidity: International evidence," Post-Print hal-02011044, HAL.
    • Handle: RePEc:hal:journl:hal-02011044
    DOI: 10.1016/j.econmod.2017.11.005
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    Citations

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    Cited by:

    1. Ramos, Sofia B. & Latoeiro, Pedro & Veiga, Helena, 2020. "Limited attention, salience of information and stock market activity," Economic Modelling, Elsevier, vol. 87(C), pages 92-108.
    2. Wang, Kai & Li, Tingting & San, Ziyao & Gao, Hao, 2023. "How does corporate ESG performance affect stock liquidity? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    3. Weihan Zhao & Jianing Zhang, 2024. "Investor Attention and Stock Liquidity in the Chinese Market," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 30(1), pages 65-82, February.
    4. Song, Ziyu & Wu, Shan, 2023. "Post financial forecasting game theory and decision making," Finance Research Letters, Elsevier, vol. 58(PA).
    5. Zhao, Shuping & Xu, Kai & Wang, Zhao & Liang, Changyong & Lu, Wenxing & Chen, Bo, 2022. "Financial distress prediction by combining sentiment tone features," Economic Modelling, Elsevier, vol. 106(C).
    6. Tariq Aziz & Valeed Ahmad Ansari, 2021. "How Does Google Search Affect the Stock Market? Evidence from Indian Companies," Vision, , vol. 25(2), pages 224-232, June.
    7. El Ouadghiri, Imane & Guesmi, Khaled & Peillex, Jonathan & Ziegler, Andreas, 2021. "Public Attention to Environmental Issues and Stock Market Returns," Ecological Economics, Elsevier, vol. 180(C).
    8. Mona Mortazian, 2022. "Liquidity and Volatility of Stocks Moved from the Main Market to the Alternative Investment Market (AIM)," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(2), pages 195-220, June.
    9. Cheng, Feiyang & Wang, Chunfeng & Chiao, Chaoshin & Yao, Shouyu & Fang, Zhenming, 2021. "Retail attention, retail trades, and stock price crash risk," Emerging Markets Review, Elsevier, vol. 49(C).
    10. Podedworna-Tarnowska Dorota & Kaszyński Daniel, 2022. "Stock returns and liquidity after listing switch on the Warsaw Stock Exchange," Economics and Business Review, Sciendo, vol. 8(4), pages 111-135, December.
    11. Ahmed, Walid M.A., 2024. "Attention to climate change and eco-friendly financial-asset prices: A quantile ARDL approach," Energy Economics, Elsevier, vol. 136(C).
    12. Szczygielski, Jan Jakub & Charteris, Ailie & Bwanya, Princess Rutendo & Brzeszczyński, Janusz, 2024. "Google search trends and stock markets: Sentiment, attention or uncertainty?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    13. Muhammad Ansar Majeed & Irfan Ullah & Samia Tariq & Tanveer Ahsan, 2025. "Does brand capital improve stock liquidity? Evidence from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 382-404, January.
    14. Cheng, Feiyang & Chiao, Chaoshin & Wang, Chunfeng & Fang, Zhenming & Yao, Shouyu, 2021. "Does retail investor attention improve stock liquidity? A dynamic perspective," Economic Modelling, Elsevier, vol. 94(C), pages 170-183.
    15. Walid M. A. Ahmed, 2024. "On the robust drivers of cryptocurrency liquidity: the case of Bitcoin," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-32, December.
    16. Hsieh, Hui-Ching & Nguyen, Van Quoc Thinh, 2021. "Economic policy uncertainty and illiquidity return premium," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    17. Michael Olumekor & Hossam Haddad & Nidal Mahmoud Al-Ramahi, 2023. "The Relationship between Search Engines and Entrepreneurship Development: A Granger-VECM Approach," Sustainability, MDPI, vol. 15(6), pages 1-16, March.

    More about this item

    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • 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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