Do recession fears help predict stock market volatility? International evidence

We develop a direct measure of recession fears using global Google search activity (Recession Fear Index, RFI) and demonstrate its strong predictive power for stock market volatility across 11 industrialized countries, both in and out of sample. This predictability delivers sizable utility benefits to investors and survives after controlling for common economic uncertainty factors and fundamentals. A decomposition analysis shows that the information content of the RFI is concentrated in its globally shared component, U.S. search activity, and finance-related search domains. Moreover, our results suggest that RFI’s predictability primarily stems from its contemporaneous reflection of economic conditions and its spillover effects on investor sentiment. • Using global Google search data, we develop a measure of Recession Fear Index (RFI). • RFI significantly predicts stock market volatility across 11 industrialized countries. • The information value of RFI varies across search domains and geographical sources. • Including RFI in the volatility forecasting framework improves investors’ utility.