Attention-return relation in the gold market and market states

Abstract

We document that the attention-return relation in the gold spot market is sensitive to market states since we identify a positive (negative) association between returns and contemporaneous attention during bull (bear) markets. This sensitivity is influenced by the magnitude of the returns, since the significance of the relation, based on a quantile model, increases almost monotonically as the return distribution moves away from the median. We further find that investor attention is influenced by recent gold spot price trends in both market states. Overall, these results suggest that gold return past performance attracts the attention of individual investors who, in turn, trade to profit from the trend, reinforcing the price movement, which is consistent with the time-series momentum framework.