Building a FOMO Index from Momentum, Search Interest, and Margin Use

Summary

The paper constructs a monthly measure of fear of missing out from three weighted components: a short-term versus long-term moving-average spread, Google search activity for FOMO-related terms, and investor margin-account use. It examines the index over 2004 to June 2021 using time-series, industry cross-sectional, and household-level analyses. The reported results include a rise in the index since 2010, an association between higher FOMO and lower VIX, and links to higher stock and cryptocurrency prices. Industry exposure varies, with electronics and chips among the more affected areas and gold and precious metals among the least affected.

For household analysis, the authors use a pseudo-panel built from Consumer Finance Survey waves because household-level FOMO data are unavailable. They report greater stock-market participation, risk-asset allocation, portfolio breadth, and trading-related overconfidence with higher FOMO, with stronger exposure among younger and minority households. These are reported associations, not a validated trading signal or proof of causality. The document gives limited detail on index weighting and robustness, and the household findings depend on proxy measures and pseudo-panel construction.

Key ideas

• The index combines market momentum, search interest, and margin use as proxies for FOMO.
• The paper reports that its FOMO measure rose over the examined period and relates to several financial indicators.
• Higher FOMO is associated with lower VIX and higher stock and cryptocurrency prices in the reported analysis.
• The household analysis uses pseudo-panel data because direct household FOMO observations are unavailable.
• Reported household associations include greater market participation, risk-taking, portfolio breadth, and overconfidence.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.