Attention is not information about a company’s profits, and it does decide which shares enter a small investor’s list of options at all. To measure it almost in real time, search frequency served as a clock, and then came the question of what followed a jump in searches. What was the sequence?
Up, then back down. Among shares in the index, a jump in searches came before buying, before a short rise in price, and before a later . The pattern holds on average across thousands of companies, which is a statement about a crowd rather than a safe tool for trading any single name.
A professional investor can scan thousands of companies; a private investor usually chooses among the few names they have seen.
is a faster gauge than mentions in a newspaper, and it captured the interest of retail investors rather than of institutions.
A rise over two weeks and a reversal within a year fit temporary buying pressure, and they do not prove that any particular search caused any particular trade. The same pattern appeared around , where attention is unusual by definition.
Publishing an effect changes the market itself. A historical pattern is no promise of a strategy that would work today, which is the ordinary fate of findings like this one.
wat. A jump in searches for a share came before a short rise and a later reversal, a sign that attention can move a price temporarily.
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What draws eyes can draw money with no new information, so a moment of popularity can be mistaken for quality.
How do we know?
Search volume for shares in the Russell 3000 index between 2004 and 2008 was set against prices, trading and the performance of new issues.
What is still unknown
A search is not necessarily an intention to buy, and the relationship changed as internet use and online trading became ordinary.
Learn something?
Where to next
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