Geopolitical Risk and the Risk Spillover on the US Technology Firms: A Quantile Perspective

Abstract

This article employs the quantile vector autoregression (QVAR) Connectedness method to investigate the impact of geopolitical risk on major US technology firms under various market conditions. The findings reveal that: 1) the overall Connectedness index peaks at 63.76% during market uptrends and reaches a low of 38.61% at the median state; 2) Microsoft and Nvidia act as net risk transmitters, whereas Apple and the geopolitical risk index serve as net risk receivers; and 3) during the COVID-19 period in 2020, Connectedness significantly increased across all quantile levels, while a differentiated pattern emerged during the Russia-Ukraine war in 2022. The main contributions of this study include: firstly, it is the first to examine the asymmetric risk linkages between geopolitical risk and US technology firms; secondly, it enriches existing theories through both static and dynamic association analyses; and thirdly, it offers valuable risk management insights for investors. These results have important implications for portfolio management and policy formulation. © 2024 The Authors. Published by Editura ASE.