"Investor attention fluctuation and stock market volatility: Evidence from China"

• Published in: PloS one Vol. 18; no. 11; p. e0293825
• Main Authors: Yang, Taiji, Zhuo, Siqi, Yang, Yongsheng
• Format: Journal Article
• Language: English
• Published: United States Public Library of Science 27.11.2023; Public Library of Science (PLoS)
• Subjects: Asian People; Attention; China - epidemiology; COVID-19 - epidemiology; Disease Outbreaks; Economic conditions; Economics; Evaluation; Forecasts and trends; Humans; Investments - economics; Stock markets; Stocks; Volatility (Finance); China
• ISSN: 1932-6203; 1932-6203
• DOI: 10.1371/journal.pone.0293825

This paper examines the linkage between Chinese stock market volatility and investor attention fluctuation. In Heterogeneous autoregressive (HAR) model, first, we analyzed the linkage between both decomposed and undecomposed stock market realized volatility and investor attention fluctuations across full-sample and two-year moving window sub-samples. Second, we compare the predictive power of four models in short-, medium-, and long-term volatility forecasting. Empirical results show large positive attention fluctuation amplified Chinese stock market volatility after the outbreak of COVID-19, and negative small attention fluctuation significantly stabilized stock market volatility before COVID-19, and the impact dwindled in after COVID-19. The model incorporating decomposed realized volatility and decomposed attention fluctuation performs better in volatility Forecasting. This research underscores a shift in the dynamics between stock market volatility and investor attention fluctuations, and investor attention fluctuation improves the volatility forecasting accuracy of the Chinese stock market.