Financial Contagion through Attention Reallocation: An Empirical Analysis
University of Toronto - Department of Economics
Princeton University - Department of Economics
This paper provides suggestive evidence of financial contagion between regions by fluctuations in international investors' attention allocation. Using Financial Times news stories about Thailand as a proxy for attention allocated to Southeast Asia, we find that the increase in uncertainty about Southeast Asian stock markets between January of 1997 and July of 1998 was associated with a higher attention allocated to this region. We also find that one more news story about Thailand in the Financial Times was statistically associated with a 6% (5%) increase in the stock market volatility of Brazil (Chile). This finding is consistent with financial contagion through attention reallocation of international investors.
Number of Pages in PDF File: 24
Keywords: Contagion, Emerging Markets, Financial Crisis, Rational Inattention
JEL Classification: F30, G15, D83working papers series
Date posted: January 15, 2007
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo6 in 0.922 seconds