August 11, 2016

SenSR: A Sentiment-based Systemic Risk Indicator

by S. Borovkova, E. Garmaev, P. Lammers and J. Rustige

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The media influence our perception of reality and, since we act on those perceptions, reality is in turn affected by the media. News is a rich source of information, but, in addition, the sentiment (i.e., the tone of financial news) tells us how others perceive the financial system and how that perception changes.

In this paper we propose a new indicator of the systemic risk in the global financial system. We call it SenSR : Sentiment-based Systemic Risk indicator. This measure is constructed by dynamically aggregating the sentiment in news about systemically important financial institutions (SIFIs).

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