Correlation Analysis Between Online Search Intensity And China Stock Market Behavior

Investors’ perfect rationality has been serving as the fundamental basis of traditional financial theories,in particular Efficient Market Hypothesis.However,this fundamental basis received critical challenges over the years,especially after the emergence of bounded rationality concept.While the influence of traditional financial theories shadowed,behavioral finance,new theory embracing and acknowledging bounded rationality,gained increasing popularity.From the perspective of investor attention and sentiment,behavioral finance provides more understandable explanation to many market anomalies than traditional financial theories.As to the stock market,distinguished from traditional financial theory,behavioral financial theories recognize the significant difference between stock price and its intrinsic value,in great part due to the irrational factors.Search intensity can be used as a proximate of the investor attention paid to a certain stock,usually strongly correlating to the stock’s abnormal trading volume and price movement.In this study,based on existed working papers,we choose China stock market as our research background where individual investors account for more than 99 percent.Our aim is to analyze the correlation of search intensity and stock market movement in order to offer more statistics on behavioral finance research.Our results show strong positive correlation between search intensity and abnormal trading volume,and significant negative correlation between search intensity and short-term returns on stock investment.