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Sentiment as Early Warning: A Systemic Risk Index for the Philippines

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  • Cruz, Lizelle Ann

Abstract

Systemic risk remains a key concern for financial authorities, especially in emerging economies where traditional, low‑frequency balance sheet indicators often lag changing conditions. This study develops a high‑frequency Systemic Risk Sentiment Index (SRSI) for the Philippines using news headlines from 2011–2025 and an ensemble of domain‑specific financial sentiment models. Results show that negative sentiment is mainly driven by external‑sector developments, market volatility, and equity‑related news, with surges aligning with global and domestic stress episodes. Empirical tests indicate only modest predictive power for domestic equity returns, and misclassifications highlight challenges in capturing nuances of Philippine financial reporting. Overall, the SRSI is best viewed as a responsive, real‑time barometer that complements conventional systemic risk measures.

Suggested Citation

  • Cruz, Lizelle Ann, 2026. "Sentiment as Early Warning: A Systemic Risk Index for the Philippines," MPRA Paper 128944, University Library of Munich, Germany, revised 06 Apr 2026.
    • Handle: RePEc:pra:mprapa:128944
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    References listed on IDEAS

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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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