Interesting new paper out showing a possible relationship between ticker search frequency for Russell 3000 stocks and subsequent stock performance:
Zhi Da, Joseph Engelberg, Pengjie Gao
March 18, 2009
Existing measures such as turnover, extreme returns, news and advertising expense are indirect proxies of investor attention. In contrast, we propose a direct measure of investor demand for attention or active attention using the aggregate search frequency in Google (SVI). In a sample of Russell 3000 stocks from 2004 to 2008, we find SVI to be correlated with but different from existing proxies of investor attention. In addition, SVI captures investor attention on a more timely basis. Using the retail order execution in the SEC Rule 11Ac1-5 reports, we establish a strong and direct link between SVI changes and trading by less sophisticated individual investors. Consistent with the findings in Barber and Odean (2008), an increase in SVI temporarily pushes up the stock prices. Such price pressure is particularly relevant during the IPO and contributes to the large first-day return and long-run underperformance of IPO stocks. We also document stronger return momentum among stocks with high level of SVIs.