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What drives the demand for information in the commodity market?

David Y. Aharon and Mahmoud Qadan

Resources Policy, 2018, vol. 59, issue C, 532-543

Abstract: We investigate the interplay between investor attention to several commodities (oil, gold, silver, copper, platinum, palladium and zinc) and investors' confidence, economic uncertainty, macroeconomic announcements and investor sentiment for 2004–2017. Using market-based and media-based measures for investor sentiment, we establish that they both prompt investors to intensify their quest for information. In addition, shocks in these commodities, captured by several volatility estimators, generally drive investors' attention. On the other hand, greater variations in searches for information predict an increase in the following trading day's volatility. We also document that macroeconomic announcements tend to be associated with more demand for information (attention) about oil, platinum and palladium, and fewer for gold, silver and zinc. Finally, we demonstrate that the demand for information varies across weekdays, which corresponds to the arrival of information hypothesis. Our findings support the theoretical contention that risk-averse agents gather information as a hedge against uncertainty, but do not support the information avoidance theories.

Keywords: Attention; Commodities; Copper; Gold; Silver; Platinum; Palladium; Oil Price; Google; Retail Investors; Risk aversion; Zinc (search for similar items in EconPapers)
Date: 2018
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