Investor attention and FX market volatility

John Goddard, Arben Kita and Qingwei Wang

Journal of International Financial Markets, Institutions and Money, 2015, vol. 38, issue C, 79-96

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.

Keywords: Investor attention; FX volatility; Option pricing; GARCH (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (78)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:38:y:2015:i:c:p:79-96

DOI: 10.1016/j.intfin.2015.05.001

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