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Decoding news: How media risk and ambiguity shape CDS spreads

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  • Sadoghi, Amirhossein
  • Santi, Caterina

Abstract

We introduce a novel method to quantify perceived global risk and ambiguity in media attention using content analysis. First, we apply structural topic modeling to risk-related news articles to identify distinct sources of uncertainty. We define ambiguity in attention as the variability in the distribution of topic probabilities across articles—that is, the extent to which media coverage diverges in its focus on different topics. In contrast, perceived risk is measured as the share of articles that assign a particular topic as their primary focus. We then examine whether these measures of perceived global risk and ambiguity in attention can explain changes in credit default swap (CDS) spreads. Our results show that greater ambiguity in news media attention is associated with a decrease in CDS spreads by up to 5.9%, while higher perceived risk corresponds to an increase of up to 4.9%. These findings highlight the role of media-driven uncertainty in shaping investor behavior and market risk perceptions.

Suggested Citation

  • Sadoghi, Amirhossein & Santi, Caterina, 2026. "Decoding news: How media risk and ambiguity shape CDS spreads," Journal of Economic Dynamics and Control, Elsevier, vol. 187(C).
    • Handle: RePEc:eee:dyncon:v:187:y:2026:i:c:s0165188926000680
    DOI: 10.1016/j.jedc.2026.105322
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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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