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

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


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 (Unpublished manuscript, Department of Economics, University of California, San Diego, 1990) to investigate the linkages between the IT stock and several non-U.S. IT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.


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



The authors are most grateful to Professor C.F. Lee for his substantive comments and suggestions that have significantly improved this manuscript. The third author would like to thank Professors Robert B. Miller and Howard E. Thompson for their continuous guidance and encouragement. The research is partially supported by University of Macau, Universiti Malaysia Sabah, and Hong Kong Baptist University.


  1. Baba, Y., R. F. Engle, D. Krafet, and K. F. Kroner. 1990. “Multivariate simultaneous generalized ARCH.” Unpublished Manuscript, Department of Economics, University of California, San Diego.Google Scholar
  2. Bollerslev, T., R. F. Engle, and J. M. Wooldridge. 1988. “A capital asset pricing model with time varying covariances.” Journal of Political Economy 96(1), 116–131.CrossRefGoogle Scholar
  3. Campbell, J. Y. and Y. Hamao. 1992. “Predictable stock returns in the United States and Japan: a study of long-term capital market integration.” Journal of Finance 47, 43–69.CrossRefGoogle Scholar
  4. Caporale, M. G., N. Ptittas, and N. Spagnolo. 2002. “Testing for causality in variance: an application to the East Asian markets.” International Journal of Finance and Economics 7, 235–245.CrossRefGoogle Scholar
  5. Edwards, S. and R. Susmel. 2001. “Volatility dependence and contagion in emerging equity markets.” Journal of Development Economics 66, 505–532.CrossRefGoogle Scholar
  6. Engle, R. F. and K. F. Kroner. 1995. “Multivariate simultaneous generalized ARCH.” Econometric Theory 11, 122–150.CrossRefGoogle Scholar
  7. Gordon, R. 2000. “Does the ‘new economy’ measure up to the great inventions of the past?” Journal of Economic Perspectives 14, 49–74.CrossRefGoogle Scholar
  8. Hamao, Y. R., W. Masulis, and V. K. Ng. 1990. “Correlations in price changes and volatility across international stock markets.” Review of Financial Studies 3, 281–307.CrossRefGoogle Scholar
  9. Hamori, S. and Y. Imamura. 2000. “International transmission of stock prices among G7 countries: LA-VAR approach.” Applied Economics Letters 7, 613–618.CrossRefGoogle Scholar
  10. Jeon, B. N. and B. S. Jang. 2004. “The linkage between the US and Korean stock markets: the case of NASDAQ, KOSDAQ, and the semiconductor stocks.” Research in International Business and Finance 18, 319–340.CrossRefGoogle Scholar
  11. Jeon, B. N. and G. M. von Furstenberg. 1990. “Growing international co-movement in stock price indexes.” Quarterly Review of Economics Business 30, 15–30.Google Scholar
  12. Jorge, C. H. and I. Iryna. 2002. Asian flu or Wall Street virus? Price and volatility spillovers of the tech and non-tech sectors in the United States and Asia, IMF working paper wp/02/154.Google Scholar
  13. Karolyi, A. G. 1995. “Multivariate GARCH model of international transmissions of stock returns and volatility: the case of the Unites States and Canada.” Journal of Business and Economics Statistics 13, 11–25.Google Scholar
  14. Liao, A. and J. Williams. 2004. “Volatility transmission and changes in stock market interdependence in the European Community.” European Review of Economic and Finance 3, 203–231.Google Scholar
  15. Lo, A. W. and A. C. MacKinlay. 1988. “Stock market prices do not follow random walks: evidence from a simple specification test.” Review of Financial Studies 1, 41–66.CrossRefGoogle Scholar
  16. Longin, F. and B. Solnik. 1995. “Is the correlation in international equity returns constant: 1960–1990?” Journal of International Money and Finance 14, 3–23.CrossRefGoogle Scholar
  17. Maich, S. 2003. “Analysts try to justify latest internet rise: a boom or bubble?” National Post, 9 September, 1.Google Scholar
  18. Masih, R. and A. M. Masih. 2001. “Long and short term dynamic causal transmission amongst international stock markets.” Journal of International Money and Finance 20, 563–587.CrossRefGoogle Scholar
  19. Oliner, S. and D. Sichel. 2000. “The resurgence of growth in the late 1990s: is information technology the story?” Journal of Economic Perspectives 14, 3–22.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • Zhuo Qiao
    • 1
  • Venus Khim-Sen Liew
    • 2
  • Wing-Keung Wong
    • 3
  1. 1.Faculty of Business AdministrationUniversity of MacauMacauChina
  2. 2.Faculty of Economics and BusinessUniversiti MalaysiaSarawakMalaysia
  3. 3.Department of EconomicsHong Kong Baptist UniversityKowloon TongHong Kong

Personalised recommendations