Investor Attention, Market Dynamics, and Behavioral Insights: A Study Using Google Search Volume

The rapid advancement of digital technology has transformed how investors gather financial information, with platforms like Google Trends providing valuable insights into investor behavior through the Google Search Volume Index (GSVI). While the relationship between the GSVI and market behavior has been explored in developed markets, its application in emerging markets like Pakistan remains underexplored. This study investigates how investor attention, measured by the GSVI, influences market volatility, liquidity, and stock price movements in the Pakistan Stock Exchange (PSX), using weekly data from the KSE-100 Index between 2019 and 2024. The findings reveal that the GSVI significantly impacts market volatility and liquidity, particularly in retail-driven markets with high information asymmetry. Additionally, this research shows that the GSVI is a reliable predictor for stock price fluctuations, with heightened investor attention correlating with increased market activity. Despite the limitations of the GSVI in fully capturing investor sentiment, this study contributes to behavioral finance literature by demonstrating the role of digital information flows in shaping market behavior in emerging markets. It offers actionable insights for investors, financial institutions, and policymakers in Pakistan while suggesting areas for future research in applying the GSVI to global contexts and exploring alternative proxies for investor sentiment in emerging economies.