Uncovering Dynamic Relationships of FAANG+M Stock Prices

• Activity Number: 92 - Time Series and Finance
• Type: Contributed
• Date/Time: Monday, August 9, 2021 : 10:00 AM to 11:50 AM
• Sponsor: Business and Economic Statistics Section
• Author(s): Yang Xue* and Seong-Tae Kim
• Companies: North Carolina A&T State University and North Carolina A&T State University
• Keywords: FAANG+M; dynamic conditional correlation; stock price; GARCH; financial portfolio

Abstract

FAANG+M refers to the six tech giants: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), Alphabet (GOOG) and Microsoft (MSFT). These high-tech companies represent nearly 25% of the S&P Index with a combined market capitalization of more than $7.77 trillion as of January 2021. Although FAANG+M stocks play a significant role in the U.S. and worldwide financial markets, their mutual dynamic relationships have not been thoroughly addressed. This study aims to investigate interactive dynamic behaviors of FAANG+M stock prices using dynamic conditional correlation methods. Multiple dynamic conditional correlation models will be compared to check their data fitting performance. In this study, we use the FAANG+M stock data between April 1, 2014 and April 1, 2021. The analytical results show idiosyncratic and common behaviors of FAANG+M stocks through time varying correlations, which are often aligned with economic and company-specific events. Our findings provide a deeper insight to understand dynamic relationships of FAANG+M for financial portfolio.