Focusing on Yahoo Finance Too Much? That’s what the evidence says…
Online Search and Return Comovement
- Alvin Chung Man Leunga, Ashish Agarwala, Prabhudev Konanaa and Alok Kumar
- A version of the paper can be found here.
- Want a summary of academic papers with alpha? Check out our free Academic Alpha Database!
This study examines return comovement within attention-induced dynamic stock categories or habitats. Using online search behavior of individuals who visit the Yahoo! Finance web site, we investigate whether (i) investors focus their attention on small subsets of stocks (i.e., habitats), that change over time and (ii) changing investor attention affects the returns of stocks within attention-based dynamic habitats. We find that stocks that are frequently viewed on the Yahoo! Finance web site form clusters and the returns of stocks within these search clusters comove together. Further, as investor attention shifts, both the cluster composition and comovement patterns change. These comovement patterns do not reflect the effects of correlated cash flows or firm-specific news. Collectively, our results provide new evidence consistent with the predictions of the habitat-based model of return comovement.
Yahoo finance, CRSP, Compustat
Search clustered stocks correlate with their cluster group more than with the market.
- Paper uses data from Yahoo! Finance website to identify stocks that cluster together.
- When choosing a ticker on this website, you get a list of other stocks people viewed that are similar to the stock you selected.
- This list is used to create clusters in the paper.
- See the paper and the appendix for the exact definition of a cluster.
- Data is during 2011 and 2012, and is for Russell 3000 stocks (98% of overall market capitalization).
- Paper finds that stocks that are clustered together exhibit comovement.
- This result cannot be explained away by news stories or other common factors such as firm size, value, industry, or supply-chain.
- When a stock leaves a cluster, it no longer comoves with the previous cluster. If it joins a new cluster it now comoves with the new cluster.
- Interesting paper which documents that stocks that internet users search comove together.
- Would normally think that retail investors are using Yahoo! Finance to search for stocks, but since these stocks comove together, maybe this is used by more sofisticated investors as well.
Note: This site provides NO information on our value investing ETFs or our momentum investing ETFs. Please refer to this site.
Join thousands of other readers and subscribe to our blog.
Please remember that past performance is not an indicator of future results. Please read our full disclosures. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. This material has been provided to you solely for information and educational purposes and does not constitute an offer or solicitation of an offer or any advice or recommendation to purchase any securities or other financial instruments and may not be construed as such. The factual information set forth herein has been obtained or derived from sources believed by the author and Alpha Architect to be reliable but it is not necessarily all-inclusive and is not guaranteed as to its accuracy and is not to be regarded as a representation or warranty, express or implied, as to the information’s accuracy or completeness, nor should the attached information serve as the basis of any investment decision. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Alpha Architect.
Definitions of common statistics used in our analysis are available here (towards the bottom)