Information disclosure vs. information learning via Google search

Abstract

We decompose the Google Trends Search Volume Index into naïve and sophisticated searches and examine their impacts on mortgage default, respectively. Using U.S. data from 2006 to 2018, we find that the sophisticated search activity has a positive and robust relationship with the change in the percentage of mortgages in 90+ days of delinquency. However, foreclosure starts are positively related to naïve search activity in the short term, but negatively related to sophisticated search activity in the long term. Borrowers are more likely learn from sophisticated online searches than from naïve online searches, and they can use the information to avoid foreclosure starts and keep their houses. The relationship between Google search activity and mortgage default outcomes are significantly stronger in states that experienced substantial house price drops in the recent year. Our findings are robust to a battery of alternative settings.