Information Demand and Stock Market Volatility

Vlastakis, Nikolaos and Markellos, Raphael (2012) Information Demand and Stock Market Volatility. Journal of Banking and Finance, 36 (6). pp. 1808-1821. ISSN 0378-4266

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Abstract

We study information demand and supply at the firm and market level using data for 30 of the largest stocks traded on NYSE and NASDAQ. Demand is approximated in a novel manner from weekly internet search volume time series drawn from the recently released Google Trends database. Our paper makes contributions in four main directions. First, although information demand and supply tend to be positively correlated, their dynamic interactions do not allow conclusive inferences about the information discovery process. Second, demand for information at the market level is significantly positively related to historical and implied measures of volatility and to trading volume, even after controlling for market return and information supply. Third, information demand increases significantly during periods of higher returns. Fourth, analysis of the expected variance risk premium confirms for the first time empirically the hypothesis that investors demand more information as their level of risk aversion increases.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
Related URLs:
Depositing User: Raphael Markellos
Date Deposited: 21 Feb 2012 09:36
Last Modified: 21 Apr 2020 16:13
URI: https://ueaeprints.uea.ac.uk/id/eprint/37263
DOI: 10.1016/j.jbankfin.2012.02.007

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