This paper examines the technology, media and telecommunications (TMT) sector, particularly whether it offers diversification benefits and greater alpha opportunities than other equity sectors. We examine whether the TMT sectors offer statistically significant levels of dispersion greater than that of both the broader market, and of other sectors. Sectors with higher breadth may be better suited for active managers to extract alpha.
We find that investors in search of alpha may find greater opportunities within TMT than most other sectors. There is a high level of dispersion and a low level of correlation across the sector, giving investment managers a more robust opportunity set for generating alpha than exists in most other sectors. Active equity returns may be enhanced by finding skillful investment managers who invest in the TMT sector.