IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v78y2025ics0275531925002867.html

Measuring the impact of cyber policy: A news-based cyber policy index and its spillover to U.S. stock sectors

Author

Listed:
  • Zong, Lu
  • Tao, Zheng
  • Zhai, Jia
  • Shi, Shimeng

Abstract

This study examines the dynamic impact of cyber policies on mitigating cyber risks and their subsequent spillover effects across U.S. equity sectors. We develop a news-based Cyber Policy Index that gauges the time-varying intensity of cyber policy, utilizing its dynamics to capture the global cyber polcy stance in response to intensifying threats. We uncover how policy developments interact with cyber risks and their impact on sector-specific stock returns. Our analysis reveals that cyber policies, while responding to short-term surges in cyber-attacks, exhibit a delayed effect on stock returns, typically manifesting in medium-level adjustments rather than extreme fluctuations. We find that the current policy framework is proficient at reducing the number of cyber-attacks, but is less effective at preventing severe damages from large-scale incidents. Notably, stocks in dataand technology-intensive sectors show reduced returns in response to cyber policy changes, highlighting their sensitivity. Additionally, the risk-mitigating effect of these policies vary across sectors, showing potential for reducing stock market risks in higher quantiles. This study offers valuable insights into how cyber policies can influence market dynamics and highlights the need for tailored strategies to enhance financial stability in the face of evolving cyber threats.

Suggested Citation

  • Zong, Lu & Tao, Zheng & Zhai, Jia & Shi, Shimeng, 2025. "Measuring the impact of cyber policy: A news-based cyber policy index and its spillover to U.S. stock sectors," Research in International Business and Finance, Elsevier, vol. 78(C).
    • Handle: RePEc:eee:riibaf:v:78:y:2025:i:c:s0275531925002867
    DOI: 10.1016/j.ribaf.2025.103030
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0275531925002867
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2025.103030?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Eling, Martin & Jung, Kwangmin, 2018. "Copula approaches for modeling cross-sectional dependence of data breach losses," Insurance: Mathematics and Economics, Elsevier, vol. 82(C), pages 167-180.
    2. Stefano Ramelli & Alexander F. Wagner & Richard J. Zeckhauser & Alexandre Ziegler, 2018. "Investor Rewards to Climate Responsibility: Evidence from the 2016 Climate Policy Shock," NBER Working Papers 25310, National Bureau of Economic Research, Inc.
    3. Husted, Lucas & Rogers, John & Sun, Bo, 2020. "Monetary policy uncertainty," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 20-36.
    4. Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272.
    5. Carboni, Marika & Dell’Atti, Stefano & Gianfrancesco, Igor & Onorato, Grazia, 2024. "The impact of cyber enforcement actions on stock returns," Research in International Business and Finance, Elsevier, vol. 71(C).
    6. Ros, Greg, 2020. "The making of a cyber crash: a conceptual model for systemic risk in the financial sector," ESRB Occasional Paper Series 16, European Systemic Risk Board.
    7. Jiang, Yong & Al-Nassar, Nassar S. & Ren, Yi-Shuai & Ma, Chao-Qun & Yang, Xiao-Guang, 2024. "Tail connectedness between category-specific policy uncertainty, sovereign debt risk, and stock volatility during a high inflation period," Research in International Business and Finance, Elsevier, vol. 70(PB).
    8. Antonis Kotidis & Stacey L. Schreft, 2022. "Cyberattacks and Financial Stability: Evidence from a Natural Experiment," Finance and Economics Discussion Series 2022-025, Board of Governors of the Federal Reserve System (U.S.).
    9. Tosun, Onur Kemal, 2021. "Cyber-attacks and stock market activity," International Review of Financial Analysis, Elsevier, vol. 76(C).
    10. Kamiya, Shinichi & Kang, Jun-Koo & Kim, Jungmin & Milidonis, Andreas & Stulz, René M., 2021. "Risk management, firm reputation, and the impact of successful cyberattacks on target firms," Journal of Financial Economics, Elsevier, vol. 139(3), pages 719-749.
    11. Arouri, Mohamed & Estay, Christophe & Rault, Christophe & Roubaud, David, 2016. "Economic policy uncertainty and stock markets: Long-run evidence from the US," Finance Research Letters, Elsevier, vol. 18(C), pages 136-141.
    12. Md. Hamid Uddin & Md. Hakim Ali & Mohammad Kabir Hassan, 2020. "Cybersecurity hazards and financial system vulnerability: a synthesis of literature," Risk Management, Palgrave Macmillan, vol. 22(4), pages 239-309, December.
    13. Jeong, Kiho & Härdle, Wolfgang K. & Song, Song, 2012. "A Consistent Nonparametric Test For Causality In Quantile," Econometric Theory, Cambridge University Press, vol. 28(4), pages 861-887, August.
    14. Baker, Scott R. & Bloom, Nicholas & Davis, Steven J. & Kost, Kyle, 2026. "Policy news and stock market volatility," Journal of Financial Economics, Elsevier, vol. 175(C).
    15. Yang Zhou & Jianqing Fan & Lirong Xue, 2024. "How Much Can Machines Learn Finance from Chinese Text Data?," Management Science, INFORMS, vol. 70(12), pages 8962-8987, December.
    16. Liu, Li & Zhang, Tao, 2015. "Economic policy uncertainty and stock market volatility," Finance Research Letters, Elsevier, vol. 15(C), pages 99-105.
    17. Balcilar, Mehmet & Gupta, Rangan & Pierdzioch, Christian, 2016. "Does uncertainty move the gold price? New evidence from a nonparametric causality-in-quantiles test," Resources Policy, Elsevier, vol. 49(C), pages 74-80.
    18. Ali K Ozdagli, 2018. "Financial Frictions and the Stock Price Reaction to Monetary Policy," The Review of Financial Studies, Society for Financial Studies, vol. 31(10), pages 3895-3936.
    19. Claire Lending & Kristina Minnick & Patrick J. Schorno, 2018. "Corporate Governance, Social Responsibility, and Data Breaches," The Financial Review, Eastern Finance Association, vol. 53(2), pages 413-455, May.
    20. Christian Biener & Martin Eling & Jan Hendrik Wirfs, 2015. "Insurability of Cyber Risk: An Empirical Analysis†," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 40(1), pages 131-158, January.
    21. Braz Golgher, André & Machado, Ana Flávia & Monsueto, Sandro Eduardo, 2006. "Desigualdades de remuneraciones en Brasil: regresiones por cuantiles y descomposición de las brechas," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    22. Wang, Jialu & Mishra, Shekhar & Sharif, Arshian & Chen, Huangen, 2024. "Dynamic spillover connectedness among green finance and policy uncertainty: Evidence from QVAR network approach," Energy Economics, Elsevier, vol. 131(C).
    23. Nerger, Gian-Luca & Huynh, Toan Luu Duc & Wang, Mei, 2021. "Which industries benefited from Trump environmental policy news? Evidence from industrial stock market reactions," Research in International Business and Finance, Elsevier, vol. 57(C).
    24. Rainer Bruggemann & Peter Koppatz & Margit Scholl & Regina Schuktomow, 2022. "Global Cybersecurity Index (GCI) and the Role of its 5 Pillars," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 159(1), pages 125-143, January.
    25. Zhang, Hongwei & Zhang, Yubo & Gao, Wang & Li, Yingli, 2023. "Extreme quantile spillovers and drivers among clean energy, electricity and energy metals markets," International Review of Financial Analysis, Elsevier, vol. 86(C).
    26. Aldasoro, Iñaki & Gambacorta, Leonardo & Giudici, Paolo & Leach, Thomas, 2022. "The drivers of cyber risk," Journal of Financial Stability, Elsevier, vol. 60(C).
    27. Frank Cremer & Barry Sheehan & Michael Fortmann & Arash N. Kia & Martin Mullins & Finbarr Murphy & Stefan Materne, 2022. "Cyber risk and cybersecurity: a systematic review of data availability," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(3), pages 698-736, July.
    28. Phan, Dinh Hoang Bach & Sharma, Susan Sunila & Tran, Vuong Thao, 2018. "Can economic policy uncertainty predict stock returns? Global evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 55(C), pages 134-150.
    29. Pham, Linh & Hao, Wei & Truong, Ha & Trinh, Hai Hong, 2023. "The impact of climate policy on U.S. environmentally friendly firms: A firm-level examination of stock return, volatility, volume, and connectedness," Energy Economics, Elsevier, vol. 119(C).
    30. Frank Adelmann & Jennifer A. Elliott & Ibrahim Ergen & Tamas Gaidosch & Nigel Jenkinson & Tanai Khiaonarong & Anastasiia Morozova & Nadine Schwarz & Christopher Wilson, 2020. "Cyber Risk and Financial Stability; It’s a Small World After All," IMF Staff Discussion Notes 2000/007, International Monetary Fund.
    31. Arouri, Mohamed & Estay, Christophe & Rault, Christophe & Roubaud, David, 2016. "Economic policy uncertainty and stock markets: Long-run evidence from the US," Finance Research Letters, Elsevier, vol. 18(C), pages 136-141.
    32. Frank Adelmann & Ms. Jennifer A. Elliott & Ibrahim Ergen & Tamas Gaidosch & Nigel Jenkinson & Mr. Tanai Khiaonarong & Anastasiia Morozova & Nadine Schwarz & Christopher Wilson, 2020. "Cyber Risk and Financial Stability: It’s a Small World After All," IMF Staff Discussion Notes 2020/007, International Monetary Fund.
    33. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    34. Emanuel Kopp & Lincoln Kaffenberger & Christopher Wilson, 2017. "Cyber Risk, Market Failures, and Financial Stability," IMF Working Papers 2017/185, International Monetary Fund.
    35. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    36. Sabani, Nazmie & Bales, Stephan & Burghof, Hans-Peter, 2024. "On the different impact of local and national sources of policy uncertainty on sectoral stock volatility," Research in International Business and Finance, Elsevier, vol. 72(PB).
    37. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chiang, Thomas C., 2021. "Spillovers of U.S. market volatility and monetary policy uncertainty to global stock markets," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    2. Zhang, Yaojie & Zhao, Xinyi & Zhang, Zhikai, 2025. "Financial regulatory policy uncertainty: An informative predictor for financial industry stock returns," The North American Journal of Economics and Finance, Elsevier, vol. 75(PB).
    3. Rehman, Mobeen Ur & Sensoy, Ahmet & Eraslan, Veysel & Shahzad, Syed Jawad Hussain & Vo, Xuan Vinh, 2021. "Sensitivity of US equity returns to economic policy uncertainty and investor sentiments," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    4. Bakhtiar Javaheri & Fateh habibi & Ramin Amani, 2022. "Economic policy uncertainty and the US stock market trading: non-ARDL evidence," Future Business Journal, Springer, vol. 8(1), pages 1-10, December.
    5. Lee A. Smales, 2021. "Policy uncertainty in Australian financial markets," Australian Journal of Management, Australian School of Business, vol. 46(3), pages 523-547, August.
    6. Zada, Hassan & Khan, Naveed & Rehman, Mobeen Ur & Vo, Xuan Vinh & Ghardallou, Wafa, 2025. "Portfolio diversification amid economic uncertainty in Pakistan: empirical evidence from the quantile-on-quantile approach," The North American Journal of Economics and Finance, Elsevier, vol. 80(C).
    7. Yuan, Di & Li, Sufang & Li, Rong & Zhang, Feipeng, 2022. "Economic policy uncertainty, oil and stock markets in BRIC: Evidence from quantiles analysis," Energy Economics, Elsevier, vol. 110(C).
    8. Das, Debojyoti & Kannadhasan, M. & Bhattacharyya, Malay, 2019. "Do the emerging stock markets react to international economic policy uncertainty, geopolitical risk and financial stress alike?," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 1-19.
    9. Aslam, Faheem & Zil-e-huma, & Bibi, Rashida & Ferreira, Paulo, 2022. "Cross-correlations between economic policy uncertainty and precious and industrial metals: A multifractal cross-correlation analysis," Resources Policy, Elsevier, vol. 75(C).
    10. Li, Tao & Ma, Feng & Zhang, Xuehua & Zhang, Yaojie, 2020. "Economic policy uncertainty and the Chinese stock market volatility: Novel evidence," Economic Modelling, Elsevier, vol. 87(C), pages 24-33.
    11. Murad, S.M. Woahid & Pathan, Shams & Durand, Robert B. & Zheng, Chen, 2025. "Understanding Bank-Level Uncertainty: New insights into banking activity and its macroeconomic impacts," International Review of Economics & Finance, Elsevier, vol. 102(C).
    12. He, Feng & Wang, Ziwei & Yin, Libo, 2020. "Asymmetric volatility spillovers between international economic policy uncertainty and the U.S. stock market," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    13. Xiao, Jihong & Jiang, Jiajie & Zhang, Yaojie, 2024. "Policy uncertainty, investor sentiment, and good and bad volatilities in the stock market: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    14. Bahram Adrangi & Arjun Chatrath & Saman Hatamerad & Kambiz Raffiee, 2025. "Equity Markets Volatility, Regime Dependence and Economic Uncertainty: The Case of Pacific Basin," Bulletin of Applied Economics, Risk Market Journals, vol. 12(1), pages 75-105.
    15. OlaOluwa S. Yaya & Nurudeen Abu & Tayo P. Ogundunmade, 2021. "Economic policy uncertainty in G7 countries: evidence of long-range dependence and cointegration," Economic Change and Restructuring, Springer, vol. 54(2), pages 541-556, May.
    16. Lambe, Brendan & Li, Zhiyong & Qin, Weiping, 2022. "Uncertain times and the insider perspective," International Review of Financial Analysis, Elsevier, vol. 81(C).
    17. Adeel Riaz & Ouyang Hongbing & Shujahat Haider Hashmi & Muhammad Asif Khan, 2018. "The Impact of Economic Policy Uncertainty on US Transportation Sector Stock Returns," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(4), pages 163-170, October.
    18. Chang, Kuang-Liang, 2021. "Do U.S. and Japanese uncertainty shocks play important roles in affecting transition mechanisms of Japanese stock market?," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    19. Nguyen Phuc Canh & Udomsak Wongchoti & Su Dinh Thanh, 2021. "Does economic policy uncertainty matter for insurance development? Evidence from 16 OECD countries," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 46(4), pages 614-648, October.
    20. Tihana Škrinjarić & Zrinka Orlović, 2020. "Economic Policy Uncertainty and Stock Market Spillovers: Case of Selected CEE Markets," Mathematics, MDPI, vol. 8(7), pages 1-33, July.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:78:y:2025:i:c:s0275531925002867. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.