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Google searches and stock returns

Author

Listed:
  • Bijl, Laurens
  • Kringhaug, Glenn
  • Molnár, Peter
  • Sandvik, Eirik

Abstract

We investigate whether data from Google Trends can be used to forecast stock returns. Previous studies have found that high Google search volumes predict high returns for the first one to two weeks, with subsequent price reversal. By using a more recent dataset that covers the period from 2008 to 2013 we find that high Google search volumes lead to negative returns. We also examine a trading strategy based on selling stocks with high Google search volumes and buying stocks with infrequent Google searches. This strategy is profitable when the transaction cost is not taken into account but is not profitable if we take into account transaction costs.

Suggested Citation

  • Bijl, Laurens & Kringhaug, Glenn & Molnár, Peter & Sandvik, Eirik, 2016. "Google searches and stock returns," International Review of Financial Analysis, Elsevier, vol. 45(C), pages 150-156.
    • Handle: RePEc:eee:finana:v:45:y:2016:i:c:p:150-156
    DOI: 10.1016/j.irfa.2016.03.015
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    References listed on IDEAS

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