Google search-based sentiment indexes

Abstract

This study sought to confirm whether Internet search-based data have the potential both to reveal populations’ underlying beliefs directly and to affect stock markets of countries – in this case, Portugal. Based on the Internet search volume of several queries related to household concerns, we constructed two Google-based sentiment measures encompassing both positive and negative search terms. The results reveal that both measures are correlated with aggregate stock market returns, trading volume and abnormal trading volume. The results contribute to the literature by highlighting the different roles of positive and negative sentiment in stock market activity