Investigating the Relationship Between Google Trends and Stock Performance Empirical Evidence from Large Cap Firms on Nasdaq Stockholm

Sammanfattning

This thesis examines whether the Abnormal Search Volume Index (ASVI) as a measure of investor attention predicts trading activity, next week returns, and subsequent return reversals on Nasdaq Stockholm Large Cap. The method applies a panel regression with two-way fixed effects on 81 firms and 21,141 weekly observations over the period January 2021 to January 2026, with variations of firm names as search terms. The results show that higher ASVI predicts increased next week trading activity with significance at the 1% level across two specifications, which validates ASVI as a measure of investor attention. The relationship between ASVI and next week returns is not statistically significant, nor is any reversal pattern detected in the subsequent weeks. An alternative search term appending the Swedish word for stock to each firm name is constructed as a robustness check, addressing the tradeoff between coverage and specificity. The alternative search term significantly predicts next week returns over the full period, concentrated in the sub-period 2021 to 2022, providing partial support for the price pressure mechanism. The alternative search term also identifies isolated significant coefficients across horizons and sub-periods but no consistent reversal pattern. The results suggest that investor attention on Nasdaq Stockholm Large Cap reaches the market through trading activity, though any return effect depends on the search term construction and period examined.