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Updated: Aug 23, 2025

An R-Based Landscape Validation of a Competing Risk Model
Published on: September 16, 2022
Global risks, the macroeconomy, and asset prices
Michele Costola1, Michael Donadelli2, Luca Gerotto1,3
1Department of Economics, Ca' Foscari University of Venice, Venice, Italy.
Abstract:
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.
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