Information demand and stock return predictability

Chronopoulos, Dimitris K., Papadimitriou, Fotios I. and Vlastakis, Nikolaos ORCID: https://orcid.org/0000-0001-6411-7708 (2018) Information demand and stock return predictability. Journal of International Money and Finance, 80. pp. 59-74. ISSN 0261-5606

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Abstract

Recent theoretical work suggests that signs of asset returns are predictable given that their volatilities are. This paper investigates this conjecture using information demand, approximated by the daily internet search volume index (SVI) from Google. Our results reveal that incorporating the SVI variable in various GARCH family models significantly improves volatility forecasts. Moreover, we demonstrate that the sign of stock returns is predictable contrary to the levels, where predictability has proven elusive in the US context. Finally, we provide novel evidence on the economic value of sign predictability and show that investors can form profitable investment strategies using the SVI.

Item Type:	Article
Additional Information:	Publisher Copyright: © 2017
Uncontrolled Keywords:	economic value,information demand,investor attention,return sign predictability,volatility forecast,finance,economics and econometrics ,/dk/atira/pure/subjectarea/asjc/2000/2003
Related URLs:	http://www.scopus.com/inward/record.url?...
Depositing User:	LivePure Connector
Date Deposited:	08 Aug 2022 09:30
Last Modified:	23 Oct 2022 04:07
URI:	https://ueaeprints.uea.ac.uk/id/eprint/87121
DOI:	10.1016/j.jimonfin.2017.10.001

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