Decoding Semiconductor Market Risks : An Econometric Approach to Modeling Semiconductor Market Risk Through Volatility and Economic Uncertainty

Sammanfattning

The semiconductor industry, pivotal to global technological advancements, is inherently volatile due to soaring demand amidst innovative breakthroughs and geopolitical dynamics. This study explores the volatility and uncertainty within the semiconductor market, employing econometric models such as the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and the Dynamic Conditional Correlation GARCH (DCC-GARCH). We analyze 20 years of daily data, focusing on the Volatility Index (VIX) and the Economic Policy Uncertainty (EPU) index to understand their impacts on the semiconductor sector. Our findings indicate a significant inverse relationship between the VIX and the semiconductor market performance, demonstrating that increased market volatility leads to declining semiconductor market returns. The EPU, while contributing to market volatility, has a less direct impact on the semiconductor sector than the VIX. This research highlights the predominant role of market volatility over policy uncertainty in influencing semiconductor market behavior, providing critical insights for investors and policymakers in strategic decision-making and risk management. By filling significant gaps in existing literature, this study offers a nuanced understanding of how economic and political factors drive volatility in the semiconductor industry over an extended timeframe.