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Information Diffusion and Safe Havens: Multi-scale Network Dynamics in the Biotech Markets
Linköping University, Department of Management and Engineering, Economics.
Linköping University, Department of Management and Engineering, Economics.
2019 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This paper analyzes the return connectedness between the biotechnology sector and other financial assets for 1 January 2000 to 31 December 2018, using an empirical approach from both time- and frequency-domain. The results reveal that the connectedness between the biotechnology sector and other financial assets are decreasing with time, entailing high diversification opportunities in the long-run. Our results also suggest that the spillover effect from the biotechnology sector is higher than the spillover effect to the biotechnology sector, proposing that the sector affects other financial assets to a greater extent than they affect the biotechnology sector. Concurrently, we found that the net directional connectedness is negative for the sector, which means that it does not transmit shocks to others since it is not subject to significant return or volatility shocks. This implies that the systematic risk connected to the biotechnology sector is lower than previous studies argue for. Thus, our main finding is that investments in the sector has safe haven properties, indicating that they are independent towards other sectors. By investing in the biotechnology sector, investors contribute to society and supports the R&D, leading to development of vital drugs. In light of this, we argue that investments in the sector are socially beneficial. Building on these insights, investments in the biotechnology sector are of importance when investing in a prosperous world.

Place, publisher, year, edition, pages
2019. , p. 55
Keywords [en]
biotech; time-frequency dynamics; connectedness; spillover; systematic risk; safe haven
National Category
Economics
Identifiers
URN: urn:nbn:se:liu:diva-159829ISRN: LIU-IEI-FIL-A--19/03128--SEOAI: oai:DiVA.org:liu-159829DiVA, id: diva2:1345087
Subject / course
Master Thesis in Economics
Supervisors
Available from: 2019-08-26 Created: 2019-08-22 Last updated: 2019-09-05Bibliographically approved

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CiteExportLink to record
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