Examining the Impact of the U.S. IT Stock Market on Other IT Stock Markets

Zhuo Qiao, Venus Khim-Sen Liew, Wing Keung Wong

Research output: Chapter in book/report/conference proceedingChapterpeer-review

Abstract

Because of its very important role in modern production and management, information technology (IT) has become a major driver of economic growth and has speeded up the integration of the global economy since the 1990s. Due to the prominent position of the IT industry in the U.S., the U.S. IT stock market is believed to have driven up IT stock markets in other countries. In this paper, we adopt a multivariate GARCH model of Baba et al. (Unpublished manuscript, Department of Economics, University of California, San Diego, 1990) to investigate the linkages between the IT stock and several non-U.S. IT markets; namely, Japan, France, Canada, Finland, Sweden, and Hong Kong. Our findings reveal that, generally, the U.S. IT market contributes strong volatility to non-U.S. IT markets rather than having a mean spillover effect, implying that the U.S. IT market plays a dominant role in the volatility of world IT markets. In addition, our analysis of the dynamic path of correlation coefficients implies that during the formation, spread, and collapse of the IT bubble, the relationships between the U.S. and non-U.S. IT markets are strong but the relationships weaken after the IT bubble bursts.
Original languageEnglish
Title of host publicationHandbook of Quantitative Finance and Risk Management
EditorsCheng-Few Lee, John Lee
PublisherSpringer Boston
Pages1283-1291
Number of pages9
Edition1st
ISBN (Electronic)9780387771175
ISBN (Print)9780387771168, 9781489995384
DOIs
Publication statusPublished - 2010

User-Defined Keywords

  • Information technology
  • IT bubble
  • Stock market
  • Integration
  • Volatility
  • Spillover effect
  • Multivariate GARCH (MGARCH)
  • Conditional correlation

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