Online Search and Return Comovement
- Alvin Chung Man Leunga, Ashish Agarwala, Prabhudev Konanaa and Alok Kumar
- A version of the paper can be found here.
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This study examines return comovement within attention-induced dynamic stock categories or habitats. Using online search behavior of individuals who visit the Yahoo! Finance web site, we investigate whether (i) investors focus their attention on small subsets of stocks (i.e., habitats), that change over time and (ii) changing investor attention affects the returns of stocks within attention-based dynamic habitats. We find that stocks that are frequently viewed on the Yahoo! Finance web site form clusters and the returns of stocks within these search clusters comove together. Further, as investor attention shifts, both the cluster composition and comovement patterns change. These comovement patterns do not reflect the effects of correlated cash flows or firm-specific news. Collectively, our results provide new evidence consistent with the predictions of the habitat-based model of return comovement.
Yahoo finance, CRSP, Compustat
Search clustered stocks correlate with their cluster group more than with the market.
- Paper uses data from Yahoo! Finance website to identify stocks that cluster together.
- When choosing a ticker on this website, you get a list of other stocks people viewed that are similar to the stock you selected.
- This list is used to create clusters in the paper.
- See the paper and the appendix for the exact definition of a cluster.
- Data is during 2011 and 2012, and is for Russell 3000 stocks (98% of overall market capitalization).
- Paper finds that stocks that are clustered together exhibit comovement.
- This result cannot be explained away by news stories or other common factors such as firm size, value, industry, or supply-chain.
- When a stock leaves a cluster, it no longer comoves with the previous cluster. If it joins a new cluster it now comoves with the new cluster.
- Interesting paper which documents that stocks that internet users search comove together.
- Would normally think that retail investors are using Yahoo! Finance to search for stocks, but since these stocks comove together, maybe this is used by more sofisticated investors as well.
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