IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v80y2019icp49-61.html
   My bibliography  Save this article

Our currency, your attention: Contagion spillovers of investor attention on currency returns

Author

Listed:
  • Wu, You
  • Han, Liyan
  • Yin, Libo

Abstract

This study investigates financial contagion among currency markets through the novel channel of investor attention measured by Google search volume index (SVI). These contagion spillovers, generated rapidly, are mainly positive and relatively short-lived. The effects are more remarkable for lagged currency attention from developed markets on emerging currency returns. Besides, the effects are barely affected by additionally controlling for liquidity, which means that investor attention plays an indispensable role in financial contagion. Additionally, past currency appreciation negatively impacts contagion spillovers of attention on present currency returns. Hence, increased attention diminishes the return predictability and therefore alleviates market inefficiency. Furthermore, we corroborate that investor attention provides a statistically significant out-of-sample forecast on currency returns, which is congruent with the previous in-sample results. Overall, our findings support the attention reallocation channel as an important contagion mechanism among currency markets and show that attention works as a predictive variable.

Suggested Citation

  • Wu, You & Han, Liyan & Yin, Libo, 2019. "Our currency, your attention: Contagion spillovers of investor attention on currency returns," Economic Modelling, Elsevier, vol. 80(C), pages 49-61.
    • Handle: RePEc:eee:ecmode:v:80:y:2019:i:c:p:49-61
    DOI: 10.1016/j.econmod.2018.05.012
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999317317236
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2018.05.012?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wan, Jieru & Yin, Libo & Wu, You, 2024. "Return and volatility connectedness across global ESG stock indexes: Evidence from the time-frequency domain analysis," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 397-428.
    2. Martina Halouskov'a & Daniel Stav{s}ek & Mat'uv{s} Horv'ath, 2022. "The role of investor attention in global asset price variation during the invasion of Ukraine," Papers 2205.05985, arXiv.org, revised Aug 2022.
    3. Qingjie Zhou & Panpan Zhu & You Wu & Yinpeng Zhang, 2022. "Research on the Volatility of the Cotton Market under Different Term Structures: Perspective from Investor Attention," Sustainability, MDPI, vol. 14(21), pages 1-20, November.
    4. Halousková, Martina & Stašek, Daniel & Horváth, Matúš, 2022. "The role of investor attention in global asset price variation during the invasion of Ukraine," Finance Research Letters, Elsevier, vol. 50(C).
    5. Panpan Zhu & Xing Zhang & You Wu & Hao Zheng & Yinpeng Zhang, 2021. "Investor attention and cryptocurrency: Evidence from the Bitcoin market," PLOS ONE, Public Library of Science, vol. 16(2), pages 1-28, February.
    6. Svatopluk Kapounek & Zuzana Kučerová & Evžen Kočenda, 2022. "Selective Attention in Exchange Rate Forecasting," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 23(2), pages 210-229, May.
    7. Qingjie Zhou & Panpan Zhu & Yinpeng Zhang, 2023. "Contagion Spillover from Bitcoin to Carbon Futures Pricing: Perspective from Investor Attention," Energies, MDPI, vol. 16(2), pages 1-22, January.
    8. Luo, Changqing & Liu, Lan & Wang, Da, 2021. "Multiscale financial risk contagion between international stock markets: Evidence from EMD-Copula-CoVaR analysis," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    9. Jiang, Shangwei & Jin, Xiu, 2021. "Effects of investor sentiment on stock return volatility: A spatio-temporal dynamic panel model," Economic Modelling, Elsevier, vol. 97(C), pages 298-306.
    10. Wang, Haiying & Yuan, Ying & Li, Yiou & Wang, Xunhong, 2021. "Financial contagion and contagion channels in the forex market: A new approach via the dynamic mixture copula-extreme value theory," Economic Modelling, Elsevier, vol. 94(C), pages 401-414.
    11. Goodell, John W. & Kumar, Satish & Li, Xiao & Pattnaik, Debidutta & Sharma, Anuj, 2022. "Foundations and research clusters in investor attention: Evidence from bibliometric and topic modelling analysis," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 511-529.
    12. Piccoli, Pedro & de Castro, Jessica, 2021. "Attention-return relation in the gold market and market states," Resources Policy, Elsevier, vol. 74(C).
    13. Panpan Zhu & Qingjie Zhou & Yinpeng Zhang, 2024. "Investor attention and consumer price index inflation rate: Evidence from the United States," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-12, December.
    14. Kumar, Pawan & Singh, Vipul Kumar, 2022. "Does crude oil fire the emerging markets currencies contagion spillover? A systemic perspective," Energy Economics, Elsevier, vol. 116(C).
    15. de Castro, Jessica & Piccoli, Pedro, 2023. "Do online searches actually measure future retail investor trades?," International Review of Financial Analysis, Elsevier, vol. 86(C).

    More about this item

    Keywords

    Investor attention; Currency returns; Contagion; Asymmetric effect; Predictability;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:80:y:2019:i:c:p:49-61. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.