Financial Contagion Through Attention Reallocation: An Empirical Analysis

24 Pages Posted: 15 Jan 2007

See all articles by Jordi Mondria

Jordi Mondria

University of Toronto - Department of Economics

Climent Quintana-Domeque

Princeton University - Department of Economics

Date Written: December 2006

Abstract

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.

Keywords: Contagion, Emerging Markets, Financial Crisis, Rational Inattention

JEL Classification: F30, G15, D83

Suggested Citation

Mondria, Jordi and Quintana-Domeque, Climent, Financial Contagion Through Attention Reallocation: An Empirical Analysis (December 2006). Available at SSRN: https://ssrn.com/abstract=957185 or http://dx.doi.org/10.2139/ssrn.957185

Jordi Mondria (Contact Author)

University of Toronto - Department of Economics ( email )

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Toronto, Ontario M5S 3G7
Canada
1-416-978-1494 (Phone)

HOME PAGE: http://individual.utoronto.ca/jmondria/

Climent Quintana-Domeque

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

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