Investor attention and FX market volatility
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- PDB4706-00.pdf
Accepted author manuscript, 231 KB, PDF document
Licence: CC BY-NC-ND Show licence
DOI
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 | |
| Publication status | Published - 19 May 2015 |
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