The Anatomy of Cyber Risk
This paper uses computational linguistics to introduce a novel measure of firm-level cyber risk exposure based on the quarterly earnings calls of listed firms. Our measure covers more than 14,000 firms from over 90 countries between 2003 and 2025. The measure is validated using human auditors and a large language model. We show that the measure affects stock returns and profits, is priced in the options market, and predicts actual cyberattacks. Cyber risk spills over across firms and propagates from firm to sector level. Back-of-the-envelope estimates suggest that the global cost of cyber risk exposure amounts to hundreds of billions of dollars annually.
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Copy CitationRustam Jamilov, Hélène Rey, and Ahmed Tahoun, "The Anatomy of Cyber Risk," NBER Working Paper 28906 (2021), https://doi.org/10.3386/w28906.Download Citation
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