Investors attention and stock returns

Investors attention is a topic of behavioral finance. Merton (1987) presented the investors’ recognition hypothesis, which later was tested in a variety of empirical designs. For example, Fang and Peress (2009) found no-media premium. Similarly, Chen (2017) documents a significant decrease in index returns following an increase in investor attention.

The Google Search Volume (SVI) data provides an excellent measure of investor attention. Search is a revealed attention measure for retail investors: if a retail investor searches for a stock ticker in Google, he is undoubtedly paying attention to the particular stock. From such data, a variety of investors’ attention measures can be constructed. For example, absolute attention, relative attention, local attention, national attention, abnormal relative attention, and so on.
Once the attention variables are constructed, then these variables can be used to classify firms into qunatile or decile groups, called portfolios. Top qunatile and bottom quantile portfolios can be used to make attention based risk factors in the spirit of small minus big (SMB) of Fama and French (1993; 1995) factor. This constructed factor can then be used as a separate risk factor or in other settings with different research hypotheses.

Our Stata Code

We have developed an efficient code for making investors’ attention variables with a large number of flavors such as:
▬ relative attention
▬ abnormal relative attention
▬ attention based on heaquarters
▬ abnormal local and national attention
▬ Simple returns of the attention portfolios
▬ cumulative returns of the attention portfolios
▬ Momentum returns calculation for the attention portfolios
▬ Weighted and un-weighted returns of the attention portfolios
▬ single and double sorts of attention portfolios with size and liquidity factors


Code for any 4 models (variations) is available for $299, plus a $50 for raw data processing (in case the data is not in Stata format and variables are not already constructed). For further details, please contact us at:


See our full list of completed projects


  1. Chen, Tao. (2017) “Investor Attention and Global Stock Returns.” Journal of Behavioral Finance Vol. 18 , Iss. 3, pp. 358-372
  2. Merton (1967). “A Simple Model of Capital Market Equilibrium with Incomplete Information.” Journal of Finance, 42, , pp. 483–510.
  3. Fang and Peress (2009). “Media Coverage and the Cross-section of Stock Returns.” Journal of Finance 64, pp. 2023–2052.