Does the Us it Stock Market Dominate Other it Stock Markets: Evidence from Multivariate GARCH Model

19 Pages Posted: 15 Aug 2006

See all articles by Zhuo Qiao

Zhuo Qiao

University of Macau

Venus Khim-Sen Liew

Universiti Malaysia Sarawak

Wing-Keung Wong

Asia University, Department of Finance

Date Written: July 2006

Abstract

Taking a very important role in modern production and management, information technology (IT) becomes a major drive for economic growth to speed up the global economy integration since the 1990s. Due to the leading position of the IT industry of the United States, its IT stock market is thus believed to have driven up the IT stock markets in other countries. To verify this argument, in this paper we adopt a multivariate GARCH model of Baba et al. (1990) to investigate the linkages between the IT stock market of the United States and several non-U.S. IT markets, namely, Japan, France, Canada, Finland, Sweden and Hong Kong. Our findings reveal that the U.S. IT market does not play a dominant role in the mean spillover effect in the sense that the U.S. IT market contributes a mean spillover effect to only a few other IT markets but some other IT markets also generate significant mean spillover effects to the U.S. IT market. However, we show that the U.S. IT market plays a leading role in the world in terms of volatility that it creates strong volatility spillover effects to all other IT stock markets except Canada. In addition, our analysis of the dynamic path of correlation coefficients infers that during the formation, spread and collapse of the IT bubble, the relations between U.S. and non-U.S. IT markets are strong but their relations weaken after the burst of the IT bubble.

Keywords: Volatility, Information Technology, Stock markets, Multivariate GARCH, IT Bubble

JEL Classification: F3, G12, G15

Suggested Citation

Qiao, Zhuo and Liew, Venus Khim-Sen and Wong, Wing-Keung, Does the Us it Stock Market Dominate Other it Stock Markets: Evidence from Multivariate GARCH Model (July 2006). Available at SSRN: https://ssrn.com/abstract=924344 or http://dx.doi.org/10.2139/ssrn.924344

Zhuo Qiao

University of Macau ( email )

P.O. Box 3001
Macau

Venus Khim-Sen Liew

Universiti Malaysia Sarawak ( email )

Faculty of Economics and Business
Kota Samarahan, Sarawak 94300
Malaysia
+6082582415 (Phone)
+6082671794 (Fax)

HOME PAGE: http://www.feb.unimas.my/

Wing-Keung Wong (Contact Author)

Asia University, Department of Finance ( email )

Taiwan
Taiwan

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