Unintentional herd behavior via the Google search volume index in international equity markets

Abstract

We find that retail investor attention measured by the Google Search Volume Index helps promote herd behavior in 21 international equity markets. The proposed methodology with only one dummy variable in the herd detection model is more appropriate than prior models which include multiple dummy variables, yielding better interpretation, reliability, and validation. As the Google searches are informative and free, investors utilize the information and unknowingly make similar trading patterns, supporting unintentional herd behavior. Interestingly, the effect of retail investor attention seems to disappear in downward markets. We attribute this finding to the ostrich effect, in which investors are less attentive during downward markets because of their psychological discomfort. The robustness of our results is consistent with the main findings. © 2022 Elsevier B.V.