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The Impact of Financial and Macroeconomic Shocks on the Entropy of Financial Markets

1
Faculty of Business Administration in Foreign Languages, Bucharest University of Economic Studies, 010374 Bucharest, Romania
2
Institute for Economic Forecasting, Romanian Academy, 050711 Bucharest, Romania
*
Author to whom correspondence should be addressed.
Entropy 2019, 21(3), 316; https://doi.org/10.3390/e21030316
Received: 26 February 2019 / Revised: 20 March 2019 / Accepted: 21 March 2019 / Published: 23 March 2019
(This article belongs to the Collection Advances in Applied Statistical Mechanics)
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Abstract

We propose here a method to analyze whether financial and macroeconomic shocks influence the entropy of financial networks. We derive a measure of entropy using the correlation matrix of the stock market components of the DOW Jones Industrial Average (DJIA) index. Using VAR models in different specifications, we show that shocks in production or the DJIA index lead to an increase in the entropy of the financial markets. View Full-Text
Keywords: entropy; financial markets; monetary policy; networks entropy; financial markets; monetary policy; networks
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Anagnoste, S.; Caraiani, P. The Impact of Financial and Macroeconomic Shocks on the Entropy of Financial Markets. Entropy 2019, 21, 316.

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