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Dependency Relations among International Stock Market Indices

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Insper Instituto de Ensino e Pesquisa, Rua Quatá, 300, São Paulo, SP, 04546-042, Brazil
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Department of Physics, Boston Univeristy, 590 Commonwealth Ave, Boston, MA 02215, USA
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Center for Polymer Studies and Department of Physics, 590 Commonwealth Avenue, Boston, MA 02215, USA
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Author to whom correspondence should be addressed.
Academic Editor: Christian Brownlees
J. Risk Financial Manag. 2015, 8(2), 227-265; https://doi.org/10.3390/jrfm8020227
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. https://doi.org/10.3390/jrfm8020227

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. https://doi.org/10.3390/jrfm8020227

Chicago/Turabian Style

Junior, Leonidas S., 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. https://doi.org/10.3390/jrfm8020227

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