Construction of Korean Shipping Industry Risk Sentiment Index using news articles

Abstract

We develop the Shipping Industry Risk Sentiment Index (SRSI) to measure risk sentiment in Korea’s shipping industry. The index is based on the frequency of news articles in Korean newspapers that contain terms related to the six C’s of credit suggested by Grammenos (2013). The dynamics of the index show that it spikes near tight periods of elevated risk sentiment including global financial crisis and the court receivership of Korea’s major shipping companies. We investigate predictive power of the index by using an autoregressive distributed lag (ARDL) model and impulse response functions from local projections. Empirical evidence shows that SRSI reflects risk sentiment in shipping industry and contains useful information to understand market situations. Copyright © The Author(s) 2023.