A1568
Title: Investor attention as a driver of connectedness across FX, bond, stock, and commodity markets: Evidence from the FFR
Authors: Wenting Zhang - University of Niigata Prefecture (Japan) [presenting]
Abstract: The aim is to examine how investor attention to the federal funds rate influences return spillovers across foreign exchange, bond, stock, and commodity markets. The framework consists of two segments. First, a time-varying parameter vector autoregressive connectedness model estimates the dynamic spillover effects across these markets from 2004 to 2025; Google search volume is employed as a proxy for investor attention and regressed on connectedness indices to evaluate the influence of attention. The findings suggest that increased attention significantly reduces the total connectedness index, indicating that attention can improve market efficiency. Second, the same influence appears on the total directional connectedness of the stock and commodity markets, helping stabilize shocks that flow into and out of both markets. However, the impact of investor attention on spillovers during different crises is heterogeneous, depending on the specific conditions at the time. These findings highlight the role of investor attention in cross-market risk contagion and suggest that policymakers monitor attention indicators and enhance investor communication to reduce information asymmetry.
