6533b86ffe1ef96bd12ce76d
RESEARCH PRODUCT
Noise traders and smart money: Evidence from online searches
Bertrand BelvauxMohamed ZouaouiFabrice Hervésubject
Economics and Econometrics050208 financeOffset (computer science)Financial economics05 social sciencesBehavioral economicsStandard measure[SHS.ECO]Humanities and Social Sciences/Economics and FinanceSmart investorsBehavioral financeNoise tradersOnline search0502 economics and businessEconomicsComputingMilieux_COMPUTERSANDSOCIETYPrice pressure hypothesis[SHS.GESTION]Humanities and Social Sciences/Business administration050207 economicsVolatility (finance)Attention measuresStock (geology)description
International audience; Traditional finance theory considers that the impact of noise traders' attention on asset prices is offset by attention from smart investors. This paper uses online search data to study the influence of noise traders and smart investors on stock returns and volatility. Adopting an original approach, we construct a proxy for smart investor attention based on investors' online search behavior provided by Wikipedia Page Traffic. We combine this new measure with a standard measure of noise traders' attention as proxied by Google Search Volume Index. We show for a sample of 87 French firms over the period 2008–2018 that only noise traders' attention influences stock returns. Noise traders' attention increases volatility by creating an extra risk that is priced into the market. Conversely, smart investors' attention decreases volatility because their presence stabilizes stock prices by reducing uncertainty. Our empirical results support a behavioral explanation of stock prices.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2019-12-01 |