Abstract

Retail investors have become increasingly active in global markets over the past several years. However, the factors that drive retail investors to focus on particular stocks are unclear. Using a sample of UK FTSE 100 stocks, this paper analyses whether stock volatility, liquidity, returns, and trading volume have the power to attract the attention of UK retail investors, measured using the Google Search Volume Index. Overall, this paper finds positive relationships between three of the dynamics (volatility, returns, and daily trading volume) and increased retail investor attention. Greater stock illiquidity also coincides with an increase in the Google Search Volume Index, although this may be due to liquidity-impacting events. When conditioning on stocks by quartiles of market capitalisation, I find that the effects of returns and trading volume are greater in magnitude for the top 25% of stocks.

Keywords: Retail Investors, Market Dynamics, Financial Markets, FTSE 100, Attention, Investor Behaviour

How to Cite:

Symons-Hicks, J., (2023) “The Influence of Market Dynamics on Retail Investor Attention”, UCL Journal of Economics 2(1), 36–64. doi: https://doi.org/10.14324/111.444.2755-0877.1611