FOMO Index: A Cross Sectional and Time Series Analyses

36 Pages Posted: 8 Dec 2021

See all articles by Yosef Bonaparte

Yosef Bonaparte

University of Colorado at Denver - Department of Finance

Date Written: September 19, 2021

Abstract

This paper presents a Fear of Missing Out (FOMO) index. The index is constructed via three equally weighted FOMO components: (1) FOMO momentum: short-long moving average; (2) FOMO news sentiment: Google search trend; and (3) FOMO risk: investor margin account usage. Applying the FOMO monthly index data between 1/2004 and 6/2021, we find that the FOMO index has been increasing since 2010, and comoves with key financial indicators, in particular, the CBOE Volatility Index (VIX), price-earnings ratio, and cryptocurrency values. However, the index exhibits a significant difference than these financial indicators. Most importantly, the FOMO index reveals a real long-term impact on stock prices, as well as on a large number of sectors and industries. Furthermore, analyzing micro data, we find that minorities, young, and risk tolerant households are the groups most exposed to FOMO. At the household level, we find that FOMO index increases the propensity to participate in the stock market and to tolerate greater finance risk; this additional risk is mitigated by increasing portfolio diversity; moreover, FOMO increases the level of household’s overconfidence.

Keywords: FOMO; panic buying; minorities’ investment; fear of missing out; short squeeze; behavioral finance

JEL Classification: G10, G12

Suggested Citation

Bonaparte, Yosef, FOMO Index: A Cross Sectional and Time Series Analyses (September 19, 2021). Available at SSRN: https://ssrn.com/abstract=3924594 or http://dx.doi.org/10.2139/ssrn.3924594

Yosef Bonaparte (Contact Author)

University of Colorado at Denver - Department of Finance ( email )

United States

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