RESUMO
We propose a novel index of global risks awareness (GRAI) based on the most concerning risks-classified in five categories (economic, environmental, geopolitical, societal, and technological)-reported by the World Economic Forum (WEF) according to the potential impact and likelihood occurrence. The degree of public concern toward these risks is captured by Google search volumes on topics having the same or similar wording of that one of the WEF Global Risk Report. The dynamics of our GRAI exhibits several spillover episodes and indicates that concerns on the five different categories of global risks are-on average-highly interconnected. We further examine the interconnection between global risks perceptions and the macroeconomy and find that concerns on economic-, geopolitical-, and societal-related risks are net shock transmitters, whereas the macroeconomic variables are largely net receivers. Finally, we perform standard cross-sectional asset pricing tests and provide evidence that rising interconnection among global risks awareness commands a positive and statistically significant risk premium.
RESUMO
This work is intended to show that past epidemic scenarios are not suitable to estimate the macroeconomic impact of the new 2019 coronavirus. Using five centuries of macroeconomic data for England and a unique dataset on epidemics and other significant events (i.e., wars and natural disasters), we show that the macroeconomic effect of epidemics reflects the socio-economic features characterizing different eras. A mapping between past epidemic scenarios and the COVID-19-induced environment can thus lead to misleading outcomes. We believe our evidence to be of general interest and key for policymakers forced to implement rapid and effective policies.