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Systematic risk contagion from cyber events

This is a syndicated repost published with the permission of True Economics. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

Our new paper, “What the hack: Systematic risk contagion from cyber events” is now available at International Review of Financial Analysis in pre-print version here: https://www.sciencedirect.com/science/article/pii/S1057521919300274.

Highlights include:

  • We examine the impact of cybercrime and hacking events on equity market volatility across publicly traded corporations.
  • The volatility generated due to cybercrime events is shown to be dependent on the number of clients exposed.
  • Significantly large volatility effects are presented for companies who find themselves exposed to hacking events.
  • Corporations with large data breaches are punished substantially in the form of stock market volatility and significantly reduced abnormal stock returns.
  • Companies with lower levels of market capitalisation are found to be most susceptible to share price reductions.
  • Minor data breaches appear to be relatively unpunished by the stock market.

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