Abstract
ABSTRACT The Fintech industry risk challenges the stability of China’s financial system. This paper makes the first attempt to capture the dynamics of the Fintech industry risk, represented by Fintech stock volatility, from the investor attention perspective. The novelty of this paper is that we fully consider the regime changes in the Fintech industry risk by adopting the AR-MS-GARCH-MIDAS with the Markov regime-switching process incorporated in the short-run volatility component, long-run volatility component, or both. We find that (1) Fintech industry risk is subject to structural breaks, (2) higher investor attention tends to alleviate the Fintech stock volatility, while the negative impact strengthens when the industry is in volatile condition, (3) investor attention contributes to improving the accuracy of the Fintech stock volatility forecasting, (4) considering the structural breaks of investor attention is important in volatility forecasting. We enrich the literature on the Fintech industry risk regulation, stock volatility forecasting, and the attention allocation theory.
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