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Article

Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods

by 1,2 and 1,2,*,†
1
CeNDEF, Amsterdam School of Economics, University of Amsterdam, 1018 WB Amsterdam, The Netherlands
2
Tinbergen Institute, 1082 MS Amsterdam, The Netherlands
*
Author to whom correspondence should be addressed.
Current address: Faculty of Economics and Business, University of Amsterdam, Roetersstraat 11, 1018 WB Amsterdam, The Netherlands.
Academic Editor: Michael (Mike) Stutzer
Entropy 2017, 19(7), 372; https://doi.org/10.3390/e19070372
Received: 16 May 2017 / Revised: 14 July 2017 / Accepted: 17 July 2017 / Published: 21 July 2017
(This article belongs to the Special Issue Entropic Applications in Economics and Finance)
The information-theoretical concept transfer entropy is an ideal measure for detecting conditional independence, or Granger causality in a time series setting. The recent literature indeed witnesses an increased interest in applications of entropy-based tests in this direction. However, those tests are typically based on nonparametric entropy estimates for which the development of formal asymptotic theory turns out to be challenging. In this paper, we provide numerical comparisons for simulation-based tests to gain some insights into the statistical behavior of nonparametric transfer entropy-based tests. In particular, surrogate algorithms and smoothed bootstrap procedures are described and compared. We conclude this paper with a financial application to the detection of spillover effects in the global equity market. View Full-Text
Keywords: transfer entropy; Granger causality; nonparametric test; bootstrap; surrogate data transfer entropy; Granger causality; nonparametric test; bootstrap; surrogate data
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MDPI and ACS Style

Diks, C.; Fang, H. Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods. Entropy 2017, 19, 372. https://doi.org/10.3390/e19070372

AMA Style

Diks C, Fang H. Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods. Entropy. 2017; 19(7):372. https://doi.org/10.3390/e19070372

Chicago/Turabian Style

Diks, Cees, and Hao Fang. 2017. "Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods" Entropy 19, no. 7: 372. https://doi.org/10.3390/e19070372

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