Overall, the results reveal a positive relationship between SVI and stock returns as well as between SVI and trading volume. In addition, a stronger correlation exists for smaller firms, and possibly due to higher percentages of individual investors found in smaller companies.
We also investigate the long-term effects of search volumes on stock returns. According to Barber and Odean (2008), an increase in investor attention should induce a temporary increase in stock prices, as the value of a company itself does not change. Our results reveal an immediate increase in stocks returns but not enough evidence to support a price reversal. In fact, there is a tendency for stock prices to have a positive long-term relationship with search frequency. This may be because in startup markets, online searches provide investors with new information that is likely to increase future firm value levels.
Our contribution to the existing literature is two-fold. First, to our knowledge, our study is the first to use data on startup markets to show that the price pressure hypothesis holds more firmly for startup markets than for large and established markets. Second, unlike trends found for the large and established markets examined in the previous studies, we do not observe reversals after an initial increase in stock prices. This difference suggests that information obtained through Internet search activities is likely to be relevant to an increase in the future value of startup companies, which tend to maintain less effective information environments than large and established companies.