Information search in times of market uncertainty: an examination of aggregate and disaggregate uncertainty

Purpose This study explores the association between individual investor information demand and two measures of market uncertainty - aggregate market uncertainty and disaggregate industry-specific market uncertainty. It extends the literature by being the first to empirically examine investor information demand and disaggregate market uncertainty. Design/methodology/approach This paper constructs a measure of information search by using the Google Search Volume Index and computes measures of aggregate and disaggregate market uncertainty using institutional investors' trading data from Ancerno Ltd. The relation between market uncertainty, as measured by trading disagreements among institutional investors, and information search is analyzed using an OLS (Ordinary Least Squares) regression model. Findings This paper finds that individual investor information demand is significantly and positively correlated with aggregate market uncertainty but not associated with disaggregated industry uncertainty. The findings suggest that individual investors may not fully incorporate all relevant uncertainty information and that ambiguity-related market pricing anomalies may be more associated with disaggregate market uncertainty. Research limitations/implications This study presents an examination of aggregate and disaggregate measures of market uncertainty and individual investor demand for information, shedding light on the efficiency of the market in incorporating information. A limitation of our study is that our data for market uncertainty is based on investor trading disagreement from Ancerno, Ltd. which is only available till 2011. However, we believe the implications are generalizable to the current time period. Practical implications This study provides the first concurrent empirical assessment of investor information search and aggregate and disaggregate market uncertainty. Prior research has separately examined information demand in these two types of market uncertainty. Thus, this study provides information to investors regarding the importance of assessing disaggregate component measures of the market. Originality/value This paper is the first to empirically examine investor information search and disaggregate market uncertainty. It also employs a unique data set and method to determine disaggregate, and aggregate, market uncertainty.