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Investor Attention and Growth Anomalies in NASDAQ Stocks-Evidence from Google Trend Volume
Journal of Finance and Accounting
Volume 8, Issue 5, September 2020, Pages: 244-251
Received: Sep. 24, 2020; Accepted: Oct. 15, 2020; Published: Oct. 26, 2020
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Ya Li, LSK School of Business and Administration, The Open University of Hong Kong, Ho Man Tin, Hong Kong
Raymond Chan, LSK School of Business and Administration, The Open University of Hong Kong, Ho Man Tin, Hong Kong
John Tsang, LSK School of Business and Administration, The Open University of Hong Kong, Ho Man Tin, Hong Kong
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We study the effects of investor attention on the capital investment anomaly on NASDAQ stocks. Based on total asset growth, researchers find firms that substantially increase capital investments subsequently achieve negative benchmark-adjusted returns. On one hand, some scholars propose that investors incorrectly underreact to the empire building behavior of managers who aggressively increase investment expenditure. On the other hand, some scholars argue that investors appear to overreact to past firm growth rates. We aim to determine whether the growth anomaly is due to underreaction or overreaction in this research. We apply Google Search Volume Index as a new direct measure of investor attention to provide empirical evidence for under-reaction and over-reaction explanations of the total asset growth anomaly on NASDAQ stocks. We adopt double sorting and Fama-MacBeth regression and find the stock prices rise up when investors search actively of the underlying stock tickers. The anomaly is stronger when investors are extremely overreacting and underreacting. When investors are rational or calm down, this total asset growth effect disappears. Our empirical design disentangles the dilemma that whether the strand of growth anomalies is due to risk or mispricing. Within proponents of mispricing, our research innovatively tease out of the opposing explanations of under-reaction and over-reaction as the relevant driver of the growth anomalies.
Attention, Google Search, Total Asset Growth
To cite this article
Ya Li, Raymond Chan, John Tsang, Investor Attention and Growth Anomalies in NASDAQ Stocks-Evidence from Google Trend Volume, Journal of Finance and Accounting. Vol. 8, No. 5, 2020, pp. 244-251. doi: 10.11648/j.jfa.20200805.15
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This article is an open access article distributed under the Creative Commons Attribution License ( which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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