The Anatomy of Cyber Risk

Rustam Jamilov (rustam.jamilov@allsouls.ox.ac.uk), Helene Rey and Ahmed Tahoun (atahoun@london.edu)
Additional contact information
Rustam Jamilov: All Souls College, University of Oxford
Ahmed Tahoun: London Business School

No inetwp206, Working Papers Series from Institute for New Economic Thinking

Abstract: This paper employs computational linguistics to introduce a novel text-based measure of firm-level cyber risk exposure based on quarterly earnings conference calls of listed firms. Our quarterly measures are available for more than 13,000 firms from 85 countries over 2002-2021. We document that cyber risk exposure predicts cyber attacks, affects stock returns and profits, and is priced in the equity option market.The cost of option protection against price, variance, and tail risks is greater for more cyber-exposed firms. Cyber risks spill over across firms and persist at the sectoral level. The geography of cyber risk exposure is well approximated by a gravity model extended with cross-border portfolio flows. Back-of-the-envelope calculations suggest that the global cost of cyber risk is over $200 billion per year.

Keywords: Cyber risk; textual analysis; earnings calls (search for similar items in EconPapers)
JEL-codes: D22 L10 (search for similar items in EconPapers)
Pages: 87 pages
Date: 2023-05-10
New Economics Papers: this item is included in nep-ind and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4470871 First version, 2023 (text/html)

Related works:
Working Paper: The Anatomy of Cyber Risk (2021)
Working Paper: The Anatomy of Cyber Risk (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:inetwp206

DOI: 10.36687/inetwp206

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