The authors investigate multiplicate relationships between investor attention and gold futures return. The Vector Auto Regression (VAR) estimates demonstrate that investor attention exhibits significant impact on gold futures returns and the effect can be positive or negative depending on how much time has elapsed since this effect. Reversely, VAR results demonstrate past gold return typically has a sizable impact on investor attention with a positive coefficient. Following the findings, they investigate the influences of four types of interaction terms and the results suggest that the attention-return relationship is significantly altered by past return, past trader positions, the severity of past attention, and the presence of extreme economic conditions. The authors also find that investor attention is closely associated with futures basis, indicating that investor attention incorporates meaningful information about expected futures prices, thus providing an alternative explanation of economic rationale for the attention-return relationship. The asset allocation exercise demonstrates substantial economic value by implementing information from investor attention.
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