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How Does Google Search Affect the Stock Market? Evidence from Indian Companies

Google search data has received considerable attention for its predictive ability in various social and economic outcomes. In the arena of investments, a surge in online searches indicates an enhanced interest of investors, particularly retail, in that company. In this article, we have examined the association between Google search and stock prices in a sample of Indian companies. The results suggest that an increase in Google search is positively related to future excess stock returns, liquidity and volatility. The positive influence of Google search on stock prices, however, is temporary and reverses in the next week. We further show that the market sentiment moderates the interconnection between Google searches and future excess stock returns. The findings are in consonance with the ‘price pressure hypothesis’ of Barber and Odean (2008, Review of Financial Studies, 21(2), 785–818).