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Interconnected Risk Contributions: A Heavy-Tail Approach to Analyze U.S. Financial Sectors

Dependency Relations among International Stock Market Indices

Insper Instituto de Ensino e Pesquisa, Rua Quatá, 300, São Paulo, SP, 04546-042, Brazil
Department of Physics, Boston Univeristy, 590 Commonwealth Ave, Boston, MA 02215, USA
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
J. Risk Financial Manag. 2015, 8(2), 227-265;
Received: 1 December 2014 / Revised: 20 April 2015 / Accepted: 29 April 2015 / Published: 29 May 2015
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
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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.

AMA Style

Junior LS, Mullokandov A, Kenett DY. Dependency Relations among International Stock Market Indices. Journal of Risk and Financial Management. 2015; 8(2):227-265.

Chicago/Turabian Style

Junior, Leonidas Sandoval, Asher Mullokandov, and Dror Y. Kenett. 2015. "Dependency Relations among International Stock Market Indices" Journal of Risk and Financial Management 8, no. 2: 227-265.

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