Investor attention and GCC stock market connectedness during the first wave of COVID-19: evidence using Google trends and VIX
Abstract
This study investigates the behavioral determinants of financial market connectedness in the Gulf Cooperation Council (GCC) during the first wave of COVID-19. It examines whether the Chicago Board Options Exchange Volatility Index (VIX), regional investor attention measured via Google Trends, and their interaction are associated with changes in connectedness. Time-varying parameter vector autoregression (TVP-VAR) is used to estimate the Total Connectedness Index (TCI) across GCC stock markets from (2018–2022). Moreover, behavioral regressions over the first wave (January–August 2020) assess the role of VIX, Google Trends-based regional attention (GTR), and their interaction. TCI nearly doubled from 31.94% during the pre-COVID period to 64.25% throughout the crisis. After controlling for oil volatility, neither VIX nor GTR was significant. Notwithstanding, their interaction is positive and statistically significant, nearly doubling the model's explanatory power. Given fundamental controls, Granger causality tests show unidirectional precedence from GTR to TCI in bivariate specifications. Results hold despite the exclusion of March 2020 and the addition of COVID-19 case growth. This study integrates TVP-VAR connectedness with behavioral finance theory in GCC markets. Crucially, it introduces Google Trends as a regional attention measure, and documents an attention–uncertainty interaction consistent with behavioral amplification through which connectedness intensifies when both channels are simultaneously elevated.