Dynamic Asymmetric Connectedness in Technological Sectors

This paper investigates the asymmetric volatility interlinkages of global IT industries. To this end, we introduce a new Wavelet-Time Varying Parameter-VAR (W-TVP-VAR) approach to examine the effectiveness of the argument that exuberance leads to spillovers over different investment horizons. Our results show that the volatility connectedness between global IT sectors is slowly transmitted across markets with an effect lasting more than twenty days. Furthermore, total spillovers significantly enhanced during the recent COVID-19 pandemic crisis period, specifically, in the short-term, suggesting that panic decisions and herd behaviour result in extreme connectedness. Besides, spillovers are asymmetric according to long-, medium-, and short-run and positive- and negative shocks, with a higher total connectedness index under negative shocks, regardless of the frequency. Negative spillovers also dominate the overall connectedness in various periods, showing more sensitivity to the pandemic