Can FEARS predict market returns?

Sammanfattning: [This paper examines whether internet queries provided by Google Trends can proxy investor sentiment and thereby predict future market returns. By creating our own Financial and Economic Attitudes Revealed by Searches (FEARS) index using Internet Search Volume (SVI), we examine the period 2013-2022. We find FEARS (i) to not predict short term reversals, and (ii) to have a contemporaneous negative correlation with returns for multiple asset classes. These results differs from the study that we replicate and other earlier research within the field. We also find inconsistencies in the data which we believe to be the reason for why our period show different results compared to earlier periods. This paper contributes to the research of investor sentiment and more particularly the use of Google Trends as a proxy for investor sentiment.]