Handbook of Media Economics, vol 1B

relatively obscure stocks. Stocks with lower investor recognition must offer higher

expected returns to compensate their owners for being imperfectly diversified.

Da et al. (2011) provide complementary evidence in an analysis of Internet searches

for information about stocks. The authors propose that the frequency of Google searches

(Search Volume Index or SVI) for a stock’s ticker is a measure of investor attention to the

stock—e.g., the SVI of “AMZN” reflects investor attention to Amazon’s stock. Using a

sample of US stocks from 2004 to 2008, they show that SVI positively predicts three

empirical proxies for attention: news stories, trading volume, and the absolute value

of stock returns. Their main result is that increases in SVI predict increases ...