An Action – Identifying Noise Traders Entering the Market with Google and Twitter

In this paper we measure and compare the impact of changes in Google search volume (GSV) and Twitter volume (TV) on financial markets. We find that information investors access via Google and Twitter have an impact on financial markets and predictive power. The impact of TV is more important. First, changes in GSV and TV have a positive impact on changes in turnover. Traders enter the market (Easley et al. 1996). Second, we show that changes in TV increase the share of noise traders on the market (De Long et al. 1990), while changes in GSV have no significant impact. Our results suggest that we are able to measure investor sentiment with TV. Further, we expect that the different impact of GSV and TV lies in the different use of Google and Twitter by investors