Big Data Strategies - Worth the Hype?

Abstract: This paper combines studies around investor attention, equity home bias puzzle and gradual diffusion of local information hypothesis. I study whether Google's Search Volume Index (SVI) has the ability to predict abnormal returns, volatility and liquidity on an industry level. To add to previous research, I study US and UK investors and their behavioural differences in investing within S&P500 and FTSE100 indices. I find US investors to be more home biased when measured in investor attention proxied by SVIs. Further, I find FTSE100 industries to have the ability to predict S&P500 abnormal returns, liquidity and volatility while there isn't enough evidence for the opposite to hold. When looking at searches between local and non-local investors, the non-local searches are mostly affected by same week's local searches. This suggests that information asymmetries between local and non-local investors are diffused within a week.