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Dependency Relations among International Stock Market Indices

Author

Listed:
  • Leonidas Sandoval Junior

    (Insper Instituto de Ensino e Pesquisa, Rua Quatá, 300, São Paulo, SP, 04546-042, Brazil)

  • Asher Mullokandov

    (Department of Physics, Boston Univeristy, 590 Commonwealth Ave, Boston, MA 02215, USA)

  • Dror Y. Kenett

    (Center for Polymer Studies and Department of Physics, 590 Commonwealth Avenue, Boston, MA 02215, USA)

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.

Suggested Citation

  • Leonidas Sandoval Junior & Asher Mullokandov & Dror Y. Kenett, 2015. "Dependency Relations among International Stock Market Indices," JRFM, MDPI, vol. 8(2), pages 1-39, May.
    • Handle: RePEc:gam:jjrfmx:v:8:y:2015:i:2:p:227-265:d:50467
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    References listed on IDEAS

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