Google Search Queries and Their Impact on Mutual Fund Performance and Flow

This study presents a novel way to interpret the effects of investor attention on mutual fund flow and performance, by using Google Trends. Google Trends is an internet service that shows the aggregated search volumes on specific keywords. Based on its nature as being representative of investors’ search frequency, Google Trends acts as a direct measure for investor attention. The paper then seeks to discover a relationship between a change in search interests and a change in mutual fund flow and performance. The data used in this study come mainly from two sources. The mutual fund data is collected from CRSP database, with important characteristics such as monthly total net assets, monthly returns, age and expense ratio. The search data is collected from Google Trends’ database using a web crawling program, with the chosen mutual funds’ tickers as keywords. The final sample includes 235 mutual funds in the U.S in the period 2006 – 2015. The study shows a significant negative link between a change in search interests and sample fund’s short-term performance. The result is opposite for flow, which displays a positive correlation with investors’ search volumes, although the data is not statistically significant. Furthermore, the study also reveals search interests would generate a bigger impact on flows into smaller funds as well as well-performing funds, but again the result is not resolute due to statistical insignificance.