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Should we pay attention to investor attention in forex futures market?

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  • Kirti Saxena
  • Madhumita Chakraborty

Abstract

We investigate whether forex futures dynamics is responsive to change in investor attention. The currencies used in the study are the AUD (Australian Dollar), CAD (Canadian Dollar), EUR (Euro), GBP (Great Britain Pound) and JPY (Japanese Yen), all in terms of USD. The Google Search Volume Index (SVI) serves as the investor attention proxy. Our results determine the multiplicate relationships of forex futures return and trading volume with SVI (investor attention). Lagged SVI impacts current forex futures return and trading volume. However, there is no nonlinear relationship between forex futures and SVI. Financial contagion among forex futures has also been analysed through the channel of investor attention (SVI). There seems to be hardly any evidence that attention to other currency markets gives rise to the contagion effect. The findings of the study are barely affected by the inclusion of control variables such as currency spot rate and fundamental variables of uncertainty, suggesting that investor attention has an influencing role in the forex futures market.

Suggested Citation

  • Kirti Saxena & Madhumita Chakraborty, 2020. "Should we pay attention to investor attention in forex futures market?," Applied Economics, Taylor & Francis Journals, vol. 52(60), pages 6562-6572, December.
    • Handle: RePEc:taf:applec:v:52:y:2020:i:60:p:6562-6572
    DOI: 10.1080/00036846.2020.1804050
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    Cited by:

    1. 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.
    2. 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).
    3. 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.

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