The Book of Alternative Data

CHAPTER 16Investor Attention

16.1. INTRODUCTION

As we have discussed, news volume can be an important metric to use to understand the market, and in particular market volatility. However, it should be noted that ultimately journalists (i.e. producers of news) are writing news they believe will be read by investors. It is not necessarily the case that because articles are written, they will attract investors' attention and be consumed. Hence, we can view news volume as broad proxy for investor attention, but with this obvious caveat.

Potentially, a closer proxy for investor attention can be seen in the way that investors actually consume information, such as their readership levels of news articles or their web search activity. Other metrics for attention can also include volumes of web traffic and page views. In this chapter, we give some specific examples of measures of investor attention, ranging from examining the readership of news articles related to payrolls, to looking at search data traffic, to Investopedia, to understanding investor anxiety. We will also create a trading strategy for EMFX based on combining measures of online attention with news volume.

16.2. READERSHIP OF PAYROLLS TO MEASURE INVESTOR ATTENTION

There are many market events that occur regularly. One of the most important of these repeated events is the US employment report, which features the release of the change in nonfarm payrolls statistics and we have discussed it many times already. While it ...