GREEDS and Stock Returns: Evidence from Global Stock Markets

This paper introduces GREEDS as a new measure of optimistic sentiment in the market. We measure the optimistic component of investor sentiment by constructing the Geographically Revealed Economic Expectations disclosed by Search (GREEDS) index from households' search behavior on Google for a sample of 38 countries. Our results reveal that the GREEDS index positively correlates with global stock returns. We show the asymmetric effect of GREEDS, which is more prevalent in developed countries than emerging markets. Our findings also highlight the role of global sentiment in financial markets through the sentiment commonality effect.

Automated summary

This paper introduces GREEDS as a new measure of optimistic sentiment in the market. The study constructs the GREEDS index based on households' search behavior on Google and reveals its positive correlation with global stock returns. The asymmetric effect of GREEDS is found to be more prevalent in developed countries than emerging markets. The findings also highlight the role of global sentiment in financial markets through the sentiment commonality effect.