It Depends on When You Search

SKU
17234

Publication History

Received: November 29, 2020
Revised: July 20, 2021; November 8, 2021; February 26, 2022
Accepted: March 14, 2022
Published Online as Accepted Author Version Preprint: Forthcoming
Published Online as Articles in Advance: Forthcoming

https://doi.org/10.25300/MISQ/2022/17234

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Abstract

Existing studies have found that online search is a revealed measure for investor attention and a useful predictor of stock returns. We study the heterogeneity in retail investor attention by comparing search conducted during weekdays and weekends, and investigate the price pressure channel and information processing channel for stock return predictability. According to the information processing channel, weekends afford retail investors more time for the intensive cognitive analysis necessary for making better predictions. Alternatively, weekend search might better capture the price pressure from retail investors’ trading activities. We provide empirical results that support the information processing channel. We first show that weekend search, rather than weekday search, predicts large-cap stock returns in both the cross section and time series. Additionally, our findings on retail trading activity contradict the price pressure channel in that weekday search, rather than weekend search, leads to a subsequent retail order imbalance. Overall, our study contributes to the literature on the predictive power of online search on stock returns, which has mainly focused on the price pressure channel, with significant results only for small-cap stocks. 

Additional Details
Author Jun Li, Xianwei Liu, Qiang Ye, Feng Zhao, and Xiaofei Zhao
Year 0
Volume Forthcoming
Issue Forthcoming
Keywords Internet search, time heterogeneity, retail investor attention, stock returns, trading activities
Page Numbers
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