The Impact of Political Signal Quality on the Dynamic Spillover of Fourth Industrial Revolution Assets

This paper analyses the dynamics of connectedness among technology-oriented assets, such as fintech, blockchain, cybersecurity, internet, and disruptive technology indices, on the effect of political signal quality on the transmission of spillovers. Applying the Time-Varying Parameter Vector Autoregressive (TVP-VAR) model with frequency-based connectedness, the paper explores dynamic, horizon-dependent spillovers in the interconnection of innovation-based financial markets from January 2015 to April 2025. The findings show consistently high interconnectedness among 4IR assets, but this level increases significantly during the COVID-19 outbreak and the Russia–Ukraine conflict. It is also found that disruptive technology and fintech indices dominate shock transmission among interconnectedness networks. Based on the frequency decomposition approach, it is evident that spillovers arise from short-run dynamics, indicating that 4IR financial systems respond quickly to uncertainty shocks and to synchronized investor behavior. The regression and quantile regression analyses indicate a conditional effect of political signal quality on connectedness, especially during crisis periods marked by higher market uncertainty and stress. Specifically, it is evident that a deterioration in political signal quality increases spillover effects due to information uncertainty and expectation-based investor behavior. This means that, in an innovation-driven financial system, uncertainty is not just transmitted through macroeconomic and financial factors, but also through political communication and information uncertainty. In summary, this paper adds to the existing literature on connectedness by considering political information quality uncertainty in analyzing the 4IR financial system and by identifying how technological integration makes the financial market vulnerable during crises.