The Relationship between Technology Life Cycle and Korean Stock Market Performance

Abstract

Through the three industrial revolutions, technology has enabled rapid changes in society. In a capitalist society, capital is invested where there is utility, for example, economic benefit. We intend to determine that the stock price of a company that uses a particular technology will change with the life cycle of the technology in question. Specifically, we filtered companies that mainly deal with augmented reality and are listed in Korea’s KOSDAQ market. We grouped these companies based on detailed technologies that constitute augmented reality. We used the event study method to calculate the stock returns against a benchmark. As a result, in the “Peak of Inflated Expectations” stage, the portfolios of all companies using augmented reality generally show higher returns than the benchmark. However, it is difficult to ascertain whether a return generated based on one of the detailed technologies that make up augmented reality is higher or lower than that of the benchmark. During the “Trough of Disillusionment” phase, there was neither a consistent trend of cumulative abnormal returns (CAR) nor buy-and-hold abnormal returns (BHAR). However, during this stage, there was a positive correlation of average BHAR and average abnormal returns between the entire sample’s portfolio and each detailed technology firm’s portfolio.