News and Networks: Using Text Analytics to Assess Bank Networks During COVID-19 Crisis

46 Pages Posted: 30 Mar 2021 Last revised: 27 Jan 2023

See all articles by Sophia Kazinnik

Sophia Kazinnik

Federal Reserve Banks - Quantitative Supervision & Research

Cooper Killen

Quantitative Supervision and Research - Federal Reserve Bank of Richmond

Daniela Scida

Quantitative Supervision and Research - Federal Reserve Bank of Richmond

John Wu

Federal Reserve Banks - Quantitative Supervision & Research

Date Written: March 29, 2021

Abstract

We study the "interconnectedness" of stress-tested banks by analyzing their financial news coverage. Following a text-to-network approach and using the COVID-19
pandemic as an external shock, we examine how bank networks behave during stress periods. We propose a measure of systemic risk that employs text-based eigenvector centrality, a relative measure of influence in a network. We show that this measure complements other traditional systemic risk measures, delivers more stable systemic risk rankings, and explains movements in financial variables. Our results showcase the value of soft information in the context of systemic risk.

Keywords: Banks, Networks, Systemic Risk, Text Analysis, COVID-19

JEL Classification: G1, D85, L14, G21, G28, G32

Suggested Citation

Kazinnik, Sophia and Killen, Cooper and Scida, Daniela and Wu, John, News and Networks: Using Text Analytics to Assess Bank Networks During COVID-19 Crisis (March 29, 2021). Available at SSRN: https://ssrn.com/abstract=3815250 or http://dx.doi.org/10.2139/ssrn.3815250

Sophia Kazinnik

Federal Reserve Banks - Quantitative Supervision & Research ( email )

United States

Cooper Killen

Quantitative Supervision and Research - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Daniela Scida (Contact Author)

Quantitative Supervision and Research - Federal Reserve Bank of Richmond ( email )

Charlotte, NC
United States

John Wu

Federal Reserve Banks - Quantitative Supervision & Research ( email )

United States

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