The Importance of Industry-, Country- and Global Factors for the Return on Technology Stocks

Abstract: We investigate to what degree return on technology stocks are affected by industry-, country- and global factors. Furthermore, the analysis is extended to look deeper into the industry factors by examining what the exposure of technology stocks to industry-specific shocks is caused by. In previous studies, the aim has been to try to determine whether industry-, country- or global effects are the most prominent for international stock returns; however, the technology industry has not yet been thoroughly investigated. There are 27 countries included in the analysis, from both developed and emerging markets. The years investigated are 1990-2015 and include returns from a technology index and an equity index for each country, a global technology index and a global equity index. The results show that industry-, country- and global effects exist in the technology industry. Moreover, high-technology export is found to have a significantly positive impact on the exposure to industry-specific shocks, whereas the dot-com crisis had a negative impact on the exposure. These results are important for forming an optimally diversified portfolio that includes technology stocks, when diversifying across industries and countries.