Journal of Applied Finance & Banking

Covid-19 and the Technology Bubble 2.0: Evidence from DCC-MGARCH and Wavelet Approaches

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  • Abstract

     

    There has probably never been as big a divergence between markets and economies as there is in the pandemic period. This paper is an attempt to test the ‘time-varying’ and ‘time-scale dependent’ volatilities of major technology stocks, FAANG and Microsoft, for analyzing the possibility of a second technology bubble in the markets. Consistent with the results of DCC-GARCH models, our analysis based on the application of the Wavelet approach also indicates that major technology behave and move as if they were all one stock in the pandemic period which makes us to be cautious about a second dotcom crisis since %26 of S&P 500 market cap is driven by FAANG and Microsoft stocks.

     

    JEL classification numbers: C58, D53, O14.

    Keywords: Dot-com crisis, tech bubble, DCC-GARCH, FAANG, Wavelet.