The effect of market attention fluctuations on portfolio strategy performance

This study explores the integration of Google Trends data to enhance investment portfolios. The utilization of search interest fluctuations as a metric for market attention has resulted in the formulation of three distinct strategies, each exhibiting a unique sensitivity to attention. Each strategy adjusts asset weights dynamically based on market attention, compared against a benchmark and naive strategy via risk-adjusted returns. An analysis of Hong Kong stock data reveals that strategies focusing on attracting attention outperform benchmarks, a finding that is further supported by the predominance of Google Trends in search traffic patterns within this context. The enhancement of these skills is contingent upon their capacity to respond expeditiously to alterations in attention. This research establishes a correlation between behavioural finance and portfolio optimization, providing evidence that real-time attention data can refine models. The proposed framework offers practical methodologies for the management of attention-driven risks.