Big Data Investments: Effects of Internet Search Queries on German Stocks

Erscheinungsjahr 2015
ISBN: 978-3-95934-597-2
Verlag: Diplomica Verlag

Buch, Englisch, Band 7, 92 Seiten, Paperback, Format (B × H): 148 mm x 210 mm, Gewicht: 146 g

Reihe: Alternative Investments

In recent years, the internet has developed very quickly and became a major source of information all over the planet. Many scientists have used search engine query data to forecast econometric time series like consumer confidence indicators, unemployment rates, retail sales, house price indices, stock prices, volatility of stocks and even commodity prices.
Following the prior research this study analyzes the impact of internet search engine data on capital markets. Many authors already have contributed to index level data and most of them on the US market.
This study adds to the existing literature on the German stock market. Two research questions are answered: First, whether an increase in search queries drives individual stock returns and second, whether queries affect the implied volatility of stock options.
After controlling for seasonality, autocorrelation and general market risk, in the further analysis also the Price-to-Book valuation, one year performance and historical volatility are examined in interaction with internet search queries.

Autoren/Hrsg.

Becker, Jan

Leseproben

Textprobe:
Chapter 1.7, Data Scope of Analysis:
The data scope of this study extends over the German Stock Index DAX® (Deutscher Aktien IndeX), MDAX® (Mid-Cap-DAX) and SDAX® (Small-Cap-DAX). The three parts are the German prime standard market indices for large, medium and small sized exchange listed companies. The blue chip index DAX covers 80% of Germany's free float market and consist of the 30 largest companies in terms of market capitalization and exchange turnover. MDAX and SDAX both have 50 titles and follow directly DAX constituents. The full prime standard would be completed by adding TECDAX® to the sample. The TECDAX consists of the 30 largest technology shares. The composition of all indices is constantly review and rebalanced on a quarterly basis, except for new listings, deletions or mergers, which are taken into account immediately (Deutsche Börse 2013, p. 19). The TECDAX was initially not included into the sample for two reasons. First, in order keep the sample size manageable and secondly with respect to the online business model of some companies (e.g. Xing or Freenet) the correlations of search queries and the success of the companies were assumed to be high ex ante. So for a generalization of theory the hypothesis should work for standard companies too.
1.7.1, Timeframe:
The overall timeframe of nine years and four month from 10 January 2004 to 4 May 2013 refers to the first publicly available observation downloadable from Google and the time of this study. All regressions are based on this time frame. It is to say, that two major macroeconomic crisis fall into this period. The global financial crisis of 2008/09 and the European sovereign debt crisis that has been going on since 2010. Both crisis affected the global economy and lead to a slowdown of production. The financial crisis of 2008 is sometimes also referred to as the "Great Recession".
1.7.2, Necessary Adjustments in Sample Selection:
Over this period not all the stocks could be added to the analysis, which adds a small selection bias. The final structure of constituents as of 6 May 2013 is modified with respect to the initial setup of January 2004 in the following way: All stocks which are included in the index in 2013 should also be in one of the three indices at the starting point of the analysis in 2004 in order to ensure that all control variables are available and the stocks are already exchange listed and tradable. This implies a survivorship bias in terms of excluding companies which defaulted or merged during the time in between. Some companies were taken private and are also excluded, because no trading prices are quoted anymore. Third, newly listed companies after 2004 are not included in the sample. There have been several event studies concerning IPO's which cover this topic (cf. Da, Engelberg and Gao, 2011). The main argument for adjusting the sample is to focus on a continuous and comparable data set basis.
1.8, Search Engines - Gateways to Information:
The internet search query data is downloaded from Google. According to webhits.de the American company Google Inc. had a German market share of 80,4% (Webhits, 2013) and a rather higher score of 83,18% was reported by netmarketshare.com on a Global ranking (Netmarketshare, 2013). This leads to the assumption that Google data can, to a certain extent, allow to appropriately test hypothesis and has the necessary data scope to draw statistically significant conclusions about overall search activities.
1.8.1, The Google Tool:
Historically, there has been" Google Trends" and "Google Insights for Search" which both have been merged into "Google Trends" in September 2012 (Google, 2012b). Since then the combined interface, under Google Trends, is the only remaining platform.
The service is provided by Google Inc. ("Google"), located at 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States, and can be accessed via Access to the data is free of charge a

Über Autor(innen)

Jan Becker was born in Hessen in the mid-west of Germany in 1986. After acquiring his Bachelor of Science in Economics and Business Administration from Goethe University in Frankfurt, he graduated as a Master of Science in Capital Markets from Frankfurt School of Finance & Management.
The author is a capital market professional in the field of asset management and quantitative finance. He gained relevant experience in practical tactical asset allocation at a renowned German asset management firm and thereafter on capital market derivative strategies for a consultancy firm in Frankfurt. His core area of expertise is centered on multi asset and absolute return investments. Today he is working for an international asset management company and supplying institutional clients with investment solutions.