Financial Contagion Through
the Lens of Media

We introduce a new measure of global financial contagion based on digital media, which investors can use to sidestep some of the worst drawdowns in equity and currency markets.

February 2020

When digital media starts mentioning many currencies together, it’s time to get nervous

The old adage that “perception is reality” rings true for financial contagion. Through our MediaStats macro linkages indicators, which distill information from more than 100,000 news articles every day, we find that media focus reveals a lot about global market fragility. When the media begins to mention many currencies together in articles, the implied macroeconomic links flag a real danger of contagion. Volatility often jumps dramatically and risky assets underperform broadly during these periods. Contagion rarely happens when media attention is focused on individual currencies in isolation. We show how this framework can be used to time global equities and currencies.