The network of firms implied by the news

by Gustavo Schwenkler, Hannan Zheng

We show that the news is a rich source of data on distressed firm links that drive firm- level and aggregate risks. The news tends to report about links in which a less popular firm is distressed and may contaminate a more popular firm. This constitutes a contagion channel that yields predictable returns and downgrades. Shocks to the degree of news-implied firm connectivity predict increases in aggregate volatilities, credit spreads, and default rates, and declines in output. To obtain our results, we propose a machine learning methodology that takes text data as input and outputs a data-implied firm network.

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Year of publication:	[2020]
Authors:	Schwenkler, Gustavo ; Zheng, Hannan
Publisher:	Frankfurt am Main, Germany : European Systemic Risk Board
Subject:	Networks \| contagion \| predictability \| risk measurement \| machine learning \| natural language processing \| Künstliche Intelligenz \| Artificial intelligence \| Unternehmensnetzwerk \| Business network \| Theorie \| Theory

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Extent:	1 Online-Ressource (circa 61 Seiten) Illustrationen
Series:	Working paper series. - Frankfurt am Main, Germany : European Systemic Risk Board, ISSN 2467-0677, ZDB-ID 2930716-8. - Vol. no 108 (January 2020)
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper
Language:	English
ISBN:	978-92-9472-129-7
Other identifiers:	10.2849/250952 [DOI] hdl:10419/244260 [Handle]
Classification:	E32 - Business Fluctuations; Cycles ; E44 - Financial Markets and the Macroeconomy ; L11 - Production, Pricing, and Market Structure Size; Size Distribution of Firms ; G10 - General Financial Markets. General ; C82 - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10012162712