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Risky news and credit market sentiment

Paul Labonne & Leif Anders Thorsrud

Journal of Economic Dynamics and Control2026https://doi.org/10.1016/j.jedc.2026.105331article
AJG 3ABDC A*
Weight
0.50

What the paper says

The nonlinear nexus between financial conditions indicators and the conditional distribution of GDP growth has recently been challenged. We show how one can use textual economic news and word embeddings to construct an alternative indicator which by design associates growth-at-risk to news about financial conditions. We then document that the proposed indicator is particularly informative about the lower left tail of the GDP distribution and delivers significantly better out-of-sample density forecasts than commonly used alternatives. Speaking to theories on endogenous information choice and credit-market sentiment we further document that the news-based index likely carries information about beliefs rather than fundamentals.

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https://doi.org/https://doi.org/10.1016/j.jedc.2026.105331

Or copy a formatted citation

@article{paul2026,
  title        = {{Risky news and credit market sentiment}},
  author       = {Paul Labonne & Leif Anders Thorsrud},
  journal      = {Journal of Economic Dynamics and Control},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1016/j.jedc.2026.105331},
}

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Risky news and credit market sentiment

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.