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The author constructs a direct measure of investor attention toward global benchmark indices using Google search volume and empirically examines its impact on stock returns. The author documents a significant decrease in index returns following an increase in investor attention. This result is consistent with the investor recognition hypothesis (Merton 1987 Merton, R. “A Simple Model of Capital Market Equilibrium with Incomplete Information.” Journal of Finance, 42, (1987), pp. 483–510.[Crossref, Web of Science ® , Google Scholar]) and the finding of no-media premium in the United States (Fang and Peress 2009 Fang, L., and J. Peress. “Media Coverage and the Cross-section of Stock Returns.” Journal of Finance 64, (2009), pp. 2023–2052.[Crossref, Web of Science ® , Google Scholar]). Additional tests suggest that the attention effect may be attributable to local and U.S. investors. Finally, such negative effect of attention is found to be strengthened (weaken) in the market with positive (negative) sentiments.
Tao Chen (Thu,) studied this question.