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A study of linkages between frontier markets and the U.S. equity markets using multivariate GARCH and transfer entropy

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  • Daugherty, Mary Schmid
  • Jithendranathan, Thadavillil

Abstract

This paper studies the integration of 20 frontier equity markets with the U.S. equity markets using variance ratios, conditional correlations and transfer entropies. The results show considerable regional variation in the level of integration. The volatility transfers, conditional correlations and transfer entropy are significantly affected by the housing market crisis of 2008–2009. The European debt crisis of 2011–2012 has less significant impact on the integration measures.

Suggested Citation

  • Daugherty, Mary Schmid & Jithendranathan, Thadavillil, 2015. "A study of linkages between frontier markets and the U.S. equity markets using multivariate GARCH and transfer entropy," Journal of Multinational Financial Management, Elsevier, vol. 32, pages 95-115.
    • Handle: RePEc:eee:mulfin:v:32-33:y:2015:i::p:95-115
    DOI: 10.1016/j.mulfin.2015.10.003
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    3. Yang, Pengbo & Shang, Pengjian & Lin, Aijing, 2017. "Financial time series analysis based on effective phase transfer entropy," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 468(C), pages 398-408.
    4. Iliyasu, Jamilu & Rafindadi Sanusi, Aliyu & Suleiman, Dahiru, 2019. "Testing For Multiple Bubble Episodes In Nigerian Stock Exchange Market," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 6(6), pages 13-26, June.
    5. Cagliesi, Gabriella & Guidi, Francesco, 2021. "A three-tiered nested analytical approach to financial integration: The case of emerging and frontier equity markets," International Review of Financial Analysis, Elsevier, vol. 74(C).
    6. Kuang, Peng-Cheng, 2021. "Measuring information flow among international stock markets: An approach of entropy-based networks on multi time-scales," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 577(C).
    7. Gannon, Gerard L. & Thuraisamy, Kannan S., 2017. "Sovereign risk and the impact of crisis: Evidence from Latin AmericaAuthor-Name: Batten, Jonathan A," Journal of Banking & Finance, Elsevier, vol. 77(C), pages 328-350.
    8. Ji, Qiang & Marfatia, Hardik & Gupta, Rangan, 2018. "Information spillover across international real estate investment trusts: Evidence from an entropy-based network analysis," The North American Journal of Economics and Finance, Elsevier, vol. 46(C), pages 103-113.
    9. Dimpfl, Thomas & Peter, Franziska J., 2019. "Group transfer entropy with an application to cryptocurrencies," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 516(C), pages 543-551.
    10. Mohti, Wahbeeah & Dionísio, Andreia & Vieira, Isabel & Ferreira, Paulo, 2019. "Financial contagion analysis in frontier markets: Evidence from the US subprime and the Eurozone debt crises," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 525(C), pages 1388-1398.
    11. Oleg Groshev, 2014. "Time varying vine copulas for multivariate returns (in Russian)," Quantile, Quantile, issue 12, pages 53-67, February.
    12. Haiyan Li & Yong Tang, 2019. "Network Structure and Dynamics of Chinese Regional Incubation," Networks and Spatial Economics, Springer, vol. 19(4), pages 1173-1197, December.

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    More about this item

    Keywords

    Frontier markets; Transfer entropy; Dynamic conditional correlation; Contagion; Housing market crisis; European debt crisis;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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