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J. Risk Financial Manag. 2015, 8(2), 227-265; doi:10.3390/jrfm8020227

Dependency Relations among International Stock Market Indices

1
Insper Instituto de Ensino e Pesquisa, Rua Quatá, 300, São Paulo, SP, 04546-042, Brazil
2
Department of Physics, Boston Univeristy, 590 Commonwealth Ave, Boston, MA 02215, USA
3
Center for Polymer Studies and Department of Physics, 590 Commonwealth Avenue, Boston, MA 02215, USA
*
Author to whom correspondence should be addressed.
Academic Editor: Christian Brownlees
Received: 1 December 2014 / Revised: 20 April 2015 / Accepted: 29 April 2015 / Published: 29 May 2015
(This article belongs to the Special Issue Econometric Analysis of Networks)

Abstract

We develop networks of international stock market indices using information and correlation based measures. We use 83 stock market indices of a diversity of countries, as well as their single day lagged values, to probe the correlation and the flow of information from one stock index to another taking into account different operating hours. Additionally, we apply the formalism of partial correlations to build the dependency network of the data, and calculate the partial Transfer Entropy to quantify the indirect influence that indices have on one another. We find that Transfer Entropy is an effective way to quantify the flow of information between indices, and that a high degree of information flow between indices lagged by one day coincides to same day correlation between them. View Full-Text
Keywords: correlation; transfer entropy; dependency correlation; transfer entropy; dependency
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Junior, L.S.; Mullokandov, A.; Kenett, D.Y. Dependency Relations among International Stock Market Indices. J. Risk Financial Manag. 2015, 8, 227-265.

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