Are FinTech, Robotics, and Blockchain index funds providing diversification opportunities with emerging markets?Lessons from pre and postoutbreak of COVID-19

Abstract

The study has been inspired by the emergence of technology-based assets, namely, FinTech, Robotics, and Blockchain in the 4th Industrial Revolution. We are examining diversification opportunities with nonconventional technology funds based on FinTech, Robotics, and Blockchain while investing in MSCI Emerging Markets Index, and finally gauging the most resilient fund during the pre-and post-outbreak of COVID-19. The five technology-driven funds considered are ARK FinTech Innovation Exchange Traded Funds (ARKF), Global X FinTech Exchange Traded Funds (FINX), First Trust NASDAQ Artificial Intelligence and Robotics Exchange Traded Funds (ROBT), Global X Robotics and Artificial Intelligence (BOTZ), and Ishares Robotics and Artificial Intelligence (IRBO) to investigate diversification opportunities with MSCI Emerging Markets Index. The time-varying dynamic spillover using the Vector Auto Regression Model for average, low, and high volatility quantiles and the network of volatility connectedness based on quantile VAR have been applied to capture diversification and identifying the most resilient fund. The study found that ARKF and FINX provide diversification opportunities. In each quantile, these two funds are evidence of diversification, and BOTZ, also shows diversification evidence. Moreover, FINX is the throughout resilient fund, and ARKF is the most resilient in extreme quantiles. Throughout the quantiles, it is perceived a significant impact of COVID-19 on the total connectedness of Funds with the emerging market index.