The Power of Narrative Attention
By Zachary Crowell, Lee Ferridge, Michael Guidi, William Kinlaw, Gideon Ozik, and Ronnie Sadka
We present new research analyzing how media-driven narratives significantly influence currency movements, offering predictive power beyond traditional economic factors.
We introduce a novel framework for quantifying how media attention to economic and geopolitical narratives impacts currency risk and returns. By analyzing nearly a decade of digital media across 52 currency pairs, we observe that sudden shocks in media focus lead to predictable currency movements over time. These shocks are not immediately priced in, creating opportunities for return predictability. Portfolio managers can use this insight to assess exposure to specific narratives and strategically hedge or capitalize on emerging storylines. The research highlights the growing importance of media sentiment in global FX markets and its practical applications for investment strategy.
