Abstract
The aim of this article is to study linkages between equity and information technology sector prices. We thus investigate the price adjustment dynamics of the Information Technology (IT) sector in response to the 2007–2009 worldwide market shock for two representative developed countries (France and the USA). Using a Vector Autoregression (VAR) methodology and different econometric specifications of a smooth transition Error-Correction Model (ECM), we find significant price reactions from the USA and French IT sectors to changes in the global capital markets over the period between 11 February 2005 and 9 July 2009. The IT price response is however stronger for the USA than for France. The empirical results suggest that the IT price convergence process towards equilibrium is typically asymmetric and nonlinearly mean-reverting for the USA.
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