Investor attention and FX market volatility

John Goddard, Arben Kita, Qingwei Wang

Research output: Contribution to journalArticlepeer-review

82 Citations (Scopus)

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 comtemporaneous 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 languageEnglish
Pages (from-to)79-96
Number of pages18
JournalJournal of International Financial Markets, Institutions and Money
Volume38
Early online date19 May 2015
DOIs
Publication statusPublished - 01 Sept 2015
Externally publishedYes

Keywords

  • investor attention
  • FX volatility
  • option pricing
  • GARCH

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