Investor Attention and Return Anomalies: Comparing Direct and Indirect Proxies of Investor Attention and Their Effect on the Swedish Stock Market

Abstract: We compare two proxies for investor attention, media coverage, measured as the number of articles written about a firm, and relative Google Search Volume Index (SVI), and investigate their role in explaining return anomalies on the Swedish stock market. Using a media-based zero-investment trading strategy we find significant abnormal returns, unexplained by known risk factors and robust to common return anomalies. This effect, driven by excess returns of no-media coverage stocks, is more pronounced among stocks of firms with large market capitalization, growth stocks and stocks with a high past 12-month momentum. In contrast, an SVI-based strategy does not exhibit any significant abnormal returns.