Tail risk intersection between tech-tokens and tech-stocks

Abstract

This study investigates the interconnectedness of upside and downside tail risks between tech-industry tokens and equities, focusing on uncertainties and portfolio implications. We estimate tail-risk measures at various quantiles using the conditional autoregressive value-at-risk method and investigate selected assets' static and dynamic connectedness using a time-varying parameter-vector autoregression approach. The findings reveal a moderate level of time-varying tail-risk interconnectedness. Furthermore, we examine the role of global uncertainty factors in tail-risk contagion and identify the factors driving connectedness. Moreover, this study analyzes portfolio implications, offering insights into effective risk management strategies and the potential benefits of diversification. These findings have significant implications for investors, regulators, and policymakers in risk management in the technology industry.