Vine copula approach to the intra-sectoral dependence analysis in the technology industry

Abstract

This study explores the dependence within the technology industry post-global financial crisis. Employing vine copula modeling, we focus on stocks of the biggest U.S. technology leaders. Our results reveal moderate to strong positive dependence, best modeled by the C-Vine structure, with Microsoft as a central variable exerting influence on the remaining companies. We also identify a significant heterogeneity in dependence specifications within the studied sample, including variations in its shape, symmetry and tails presence. This motivates the adoption of a wide range of copula families, ranging from elliptical to extreme value models, to capture the dependence characteristics.