Google Search Volume and its Relationship with Return Trading Volume and Liquidity: A Comparable Study of European Markets

Johanna Carlsson & Johanna Svanqvist

Student thesis: Master thesis


In the process of investment choices, human attention is a scarce resource and thus investors need to be selective given the large amount of information accessible and their limited attention. We examine how investor attention affects stock price movements in four different European markets. In accordance with prior research and motivated by the fact that media coverage or advertisements does not guarantee attention, we use Google search volume of company names as a proxy for investor attention attracted by a specific company. Our results suggest that an increase in search volume is asscoiated with higher trading volume and liquidity. We conclude that the increased liquidity is most likely due to changes in asymmetric information costs. Moreover, in three out of four markets, we find a short-term positive relationship between search volume and return. In contrast, in one market, our results reveal a temporarily negative relationship between search volume and return. We attribute this observation to differences in the level of economic uncertainty.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2020
Number of pages94