|M.Sc Student||Arditi Eli|
|Subject||The Effect of Stock Market Losses on Subsequent|
|Department||Department of Industrial Engineering and Management||Supervisors||Professor Eldad Yechiam|
|Dr. Gal Zahavi|
|Full Thesis text|
Experimental studies in the area of Psychology and Behavioral Economics have suggested that losses lead to increased search among relevant alternatives. Using Internet search data provided by Google, we investigated the relationship between stock-specific events and related Google searches. We studied daily data from 13 stocks from the Dow-Jones and NASDAQ100 indices, over a period of 4 trading years. Focusing on Intensive Search Periods (ISPs) of these stocks tickers, we found a correlation between the magnitude of the stock return at the beginning of the period and the volume, peak, and duration of search generated during the period. This correlation was considerably magnified in cases of negative stock returns at the beginning of the ISP. However, across all ISPs, we did not find that losses were associated with increased Google searches. Thus, rather than increasing search, losses improved the sensitivity of the search volume to the magnitude of the market event. These findings are consistent with a psychological explanation for market anomalies such as the leverage effect.