DP16217 The Anatomy of Cyber Risk

Author(s): Rustam Jamilov, Hélène Rey, Ahmed Tahoun
Publication Date: June 2021
Keyword(s):
JEL(s): G12, G14, G15, G30, G32
Programme Areas: Financial Economics, International Macroeconomics and Finance
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16217

We construct novel text-based measures of firm-level cyber risk exposure based on quarterly earnings calls of 12,000+ firms from 85 countries over 20+ years. We categorize each cyber-related discussion into topics that capture sentiment, monetary loss, country names, etc. We document new facts on the worldwide rise of cyber risk and its industrial and geographical composition. We characterize most affected firms and show that our indices can predict future cyberattacks. Cyber risk exposure has significant direct and contagion effects on stock returns. Finally, there is a factor structure in our firm-level measures and shocks to the common factor are priced.