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Copula approach to market volatility and technology stocks dependence

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  • Rašiová, Barbara
  • Árendáš, Peter

Abstract

Despite the technology sector being highly responsive to market fluctuations, individual instances of its lower sensitivity to high market volatility and crisis are documented. This paper analyzes the dependence between the stock market volatility and technology on the U.S. market using the copula modeling approach. Results indicate that The dependence between market volatility and returns of the technology stocks is strongly negative and asymmetrically increasing with surges in market volatility, signaling a presence of negative lower tail. The 270°rotated Gumbel copula is chosen as the best fitting model. The observed dependence is in line with stylized facts for financial returns.

Suggested Citation

  • Rašiová, Barbara & Árendáš, Peter, 2023. "Copula approach to market volatility and technology stocks dependence," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322007292
    DOI: 10.1016/j.frl.2022.103553
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    Cited by:

    1. Ardakani, Omid M. & Ajina, Rawan, 2024. "Tail risks in household finance," Finance Research Letters, Elsevier, vol. 69(PA).

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    More about this item

    Keywords

    Copula; Market volatility; Technology; Stock returns;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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