Abstract
Do people show fads and fashions in their attention searches? With the Google online search data during COVID-19, particularly from January to May 2020 for the socio-economic keywords, this study examines if online searches show short-run and long-run attention dynamics leading to fads and fashions in attention to the NSE Nifty and BSE Sensex indices. This study employs the methodology of cointegrating relationship with autoregressive distributed lag (ARDL) model and explains investors’ attention search dynamics at the ‘NSE Nifty Index’ and ‘BSE Sensex Index’ caused by socio-economic attention searches. It also examines if the dynamics of attention coordination are parsimonious in nature and it explores the same with the generalized autoregressive conditional heteroskedastic (GARCH-X) model. With the ARDL models, this study finds robust and unbiased cointegrating impacts of socio-economic attention searches on the attention search for the NSE Nifty index but these are not the best linear unbiased and efficient (BLUE) ones, while the same on the BSE Sensex Index are BLUE. For the NSE Nifty index, the attention dynamics at the GARCH-X specification are BLUE while for the BSE Sensex index, the GARCH-X specification also has some additional information in terms of the ARCH effect only.
Highlights
Given the unprecedented public attention to COVID-19, our society at present belongs to the new normal of economic life
Step 1: In the unrestricted short-run form (SRF) of the autoregressive distributed lag (ARDL) model, we look into the values of the regression R2 and adj
We discover that the generalized autoregressive conditional heteroskedastic (GARCH)-X setup is the efficient description for the dynamics of attention cointegration
Summary
Given the unprecedented public attention to COVID-19, our society at present belongs to the new normal of economic life. Does investors’ attention to stock markets reveals the new normal of trading interests? Does this new normal cause fads, fashions, or bubbles in the stock markets? The answers are affirmative since stock-trading is a socio-economic activity and traders’ changing sentiments, fads, fashions, and bubbles govern the stock markets (Shiller, 1988; Shiller et al, 1984). The fads, fashions, customs and cultural changes in the stock markets can be explained by informational cascade (Bikhchandani et al, 1992). Investors follow their predecessors’ behaviour(s) and disregard their own information. Banerjee (1992) has called this sequential behaviour(s) as herd behaviour(s) Both information cascade and herd behaviour appear at interpersonal communication of information (Shiller, 1995). In Keynes (1936)’s beauty contest, investors more passionately pay attention to others’ insights than their self-insights about assets’ future prices
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