Investors’ attention and network spillover for commodity market forecasting

This paper explores the role of network spillovers in commodity market forecasting and proposes a novel factor-augmented dynamic network model. We focus on a novel network definition based on investors’ attention to commodities, positing that commodities exhibit spillovers if they share a similar level of interest. To this aim, we employ Google Trends search data as an instrumental measure for attention. The results reveal that including attention-driven spillovers significantly enhances the forecasting accuracy of commodity returns.