RETURN, RISK AND MARKET INDEKS ONLINE VOLUME SEARCH INTERDEPENDENCE: SHOCK SPILLOVER APPROACH ON ZAGREB STOCK EXCHANGE

This research examines the time-varying interdependence and shock spillovers between the return and risk of the official Zagreb Stock Exchange index and the online volume search on the Google search engine. The aim is to examine how investors’ attention measured by the online volume search can be used in modelling of the return and/or risks of the official stock market index. However, the methodology allows for a feedback relationship from the return and risk series to the volume search variable. Based on monthly data for the period from April 2004 to January 2019, results indicate that a time-varying interdependence is found for all three variables in the model. Moreover, spillover shocks are greater in the financial crisis and the crisis of Agrokor concern (in the spring of 2017). The contribution of this research is found in using a relatively new methodology of spillover index within the vector autoregression model in applying this methodology within the finance topics examined in the literature. Based on the results in the paper, guidelines are given to potential investors for future applications.