Stock Market Valuation Using Internet Search Volumes: US-China Comparison

Search engine query data, which provide information on individuals’ attention allocation, have been proven by scholars to be useful in interpreting financial market performance. This paper explores the use of search volumes in stock market valuation and seeks to identify underlying stock market differences between the U.S. and China by extracting search volume data from their respective dominant search engines – Google and Baidu. On the overall market level, this paper investigates how search terms about financial markets relate to weekly returns of important market indices in each country; on the individual stock level, search volumes of selected company names in each country’s stock market are used to study fluctuations in stock prices. Finally, a set of trading strategies are recommended after combining research results in this paper with search-based strategies proposed in previous studies.