Does Investor Attention Matter? Fresh evidences from Wavelet Approach

The COVID-19 pandemic drastically damaged business activities that not only affected conventional financial markets but also upset Islamic securities. Given the severity of the recent pandemic, this study looked at the returns of the investor attention index, Islamic bonds, and stock indexes in the occurrence of the ADS business condition index. Bivariate and multivariate wavelet analysis was employed on the daily data from January 2, 2020, to July 27, 2020. The study results indicate that before April 2020, there was a negative coherence between the investor attention index and the ADS, Islamic bonds, and stock returns. After that date, however, there is a positive relationship between the attention index and Islamic bonds. In addition, the relationship between investors’ attention and the ADS index shows both short-term and long-term correlations, but the long-term correlations are clearer. It has implications for household investors by empirically revealing the significance of Google trends for Islamic capital markets in the pre and during pandemic situation. Our results show that the way investors use the Google search engine is a key factor in how prices respond to new information.