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On Capturing the Spreading Dynamics over Trading Prices in the Market

Author

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  • Situngkir, Hokky

Abstract

While market is a social field where information flows over the interacting agents, there have been not so many methods to observe the spreading information in the prices comprising the market. By incorporating the entropy transfer in information theory in its relation to the Granger causality, the paper proposes a tree of weighted directed graph of market to detect the changes of price might affect other price changes. We compare the proposed analysis with the similar tree representation built from the correlation coefficients of stock prices in order to have insight of possibility in seeing the collective behavior of the market in general.

Suggested Citation

  • Situngkir, Hokky, 2015. "On Capturing the Spreading Dynamics over Trading Prices in the Market," MPRA Paper 67247, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:67247
    as

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    File URL: https://mpra.ub.uni-muenchen.de/67247/1/MPRA_paper_67247.pdf
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    References listed on IDEAS

    as
    1. Hokky Situngkir & Yohanes Surya, 2004. "Stylized Statistical Facts of Indonesian Financial Data: Empirical Study of Several Stock Indexes in Indonesia," Papers cond-mat/0403465, arXiv.org.
    2. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    3. Hokky Situngkir & Yohanes Surya, 2005. "On Stock Market Dynamics through Ultrametricity of Minimum Spanning Tree," Macroeconomics 0505010, University Library of Munich, Germany.
    4. Cont, Rama & Bouchaud, Jean-Philipe, 2000. "Herd Behavior And Aggregate Fluctuations In Financial Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 4(2), pages 170-196, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    stock market; spreading information dynamics; econophysics; information theory; transfer entropy; granger causality; ultrametric;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E0 - Macroeconomics and Monetary Economics - - General
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • Y1 - Miscellaneous Categories - - Data: Tables and Charts

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