Understanding sectoral co-movement and investor behaviour during black swan events: a study of tech and pharma stocks during the global pandemic

Abstract The COVID-19 pandemic exposed vulnerabilities in global financial markets and altered investor behaviour across sectors under conditions of heightened uncertainty. This study examines whether the technology and pharmaceutical sectors exhibited distinct patterns of synchronization with the S&P 500 during pandemic waves and inter-wave periods. Sector–benchmark co-movement is evaluated using rank-based correlation measures across short lead–lag structures and epidemiologically defined phases spanning March 2019 to December 2022. To capture potential changes in sectoral alignment with the market benchmark, the analysis adopts a phase-sensitive framework that allows co-movement to vary across different stages of the pandemic. Sector-level evidence is complemented by firm-level illustrations using representative companies from each sector. This approach enables an assessment of whether observed synchronization reflects contemporaneous market integration or more episodic, sector-specific dynamics during periods of systemic stress. The findings indicate that the technology sector displayed relatively stronger and more contemporaneous alignment with the S&P 500, particularly during periods of elevated uncertainty, whereas the pharmaceutical sector exhibited more irregular and event-driven co-movement patterns. These results suggest that sectoral synchronization during the pandemic was heterogeneous and evolved over time rather than remaining constant across sectors or phases. By focusing on sector–benchmark interactions during an extreme global shock, this study contributes to the literature on financial market behaviour under crisis conditions. The results highlight the importance of sector-level analysis when assessing diversification properties and market integration during periods of heightened uncertainty.