Investor attention and FX market volatility

J.A. Goddard; A. Kita; Q. Wang

doi:10.1016/j.intfin.2015.05.001

Investor attention and FX market volatility

J.A. Goddard
, A. Kita
, Q. Wang

The Albert Gubay Business School

Research output: Contribution to journal › Article › peer-review

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Abstract

We study the relationship between investors’ active attention, measured by a Google search volume index (SVI), and the dynamics of currency prices. Investor attention is correlated with the trading activities of large FX market participants. Investor attention comoves with contemporaneous FX market volatility and predicts subsequent FX market volatility, after controlling for macroeconomic fundamentals. In addition, investor attention is related to the currency risk premium. Our results suggest that investor attention is a priced source of risk in FX markets.

Original language	English
Pages (from-to)	79-96
Journal	Journal of International Financial Markets, Institutions and Money
Volume	38
DOIs	https://doi.org/10.1016/j.intfin.2015.05.001
Publication status	Published - 19 May 2015

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title = "Investor attention and FX market volatility",

abstract = "We study the relationship between investors{\textquoteright} active attention, measured by a Google search volume index (SVI), and the dynamics of currency prices. Investor attention is correlated with the trading activities of large FX market participants. Investor attention comoves with contemporaneous FX market volatility and predicts subsequent FX market volatility, after controlling for macroeconomic fundamentals. In addition, investor attention is related to the currency risk premium. Our results suggest that investor attention is a priced source of risk in FX markets.",

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AU - Goddard, J.A.

AU - Kita, A.

AU - Wang, Q.

PY - 2015/5/19

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N2 - We study the relationship between investors’ active attention, measured by a Google search volume index (SVI), and the dynamics of currency prices. Investor attention is correlated with the trading activities of large FX market participants. Investor attention comoves with contemporaneous FX market volatility and predicts subsequent FX market volatility, after controlling for macroeconomic fundamentals. In addition, investor attention is related to the currency risk premium. Our results suggest that investor attention is a priced source of risk in FX markets.

AB - We study the relationship between investors’ active attention, measured by a Google search volume index (SVI), and the dynamics of currency prices. Investor attention is correlated with the trading activities of large FX market participants. Investor attention comoves with contemporaneous FX market volatility and predicts subsequent FX market volatility, after controlling for macroeconomic fundamentals. In addition, investor attention is related to the currency risk premium. Our results suggest that investor attention is a priced source of risk in FX markets.

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DO - 10.1016/j.intfin.2015.05.001

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JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

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Investor attention and FX market volatility

Abstract

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