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Effects of time dependency and efficiency on information flow in financial markets

Author

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  • Eom, Cheoljun
  • Jung, Woo-Sung
  • Choi, Sunghoon
  • Oh, Gabjin
  • Kim, Seunghwan

Abstract

We investigated financial market data to determine which factors affect information flow between stocks. Two factors, the time dependency and the degree of efficiency, were considered in the analysis of Korean, the Japanese, the Taiwanese, the Canadian, and US market data. We found that the frequency of the significant information decreases as the time interval increases. However, no significant information flow was observed in the time series from which the temporal time correlation was removed. These results indicated that the information flow between stocks evidences time-dependency properties. Furthermore, we discovered that the difference in the degree of efficiency performs a crucial function in determining the direction of the significant information flow.

Suggested Citation

  • Eom, Cheoljun & Jung, Woo-Sung & Choi, Sunghoon & Oh, Gabjin & Kim, Seunghwan, 2008. "Effects of time dependency and efficiency on information flow in financial markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(21), pages 5219-5224.
    • Handle: RePEc:eee:phsmap:v:387:y:2008:i:21:p:5219-5224
    DOI: 10.1016/j.physa.2008.05.054
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    Citations

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    Cited by:

    1. Mensi, Walid & Lee, Yun-Jung & Vinh Vo, Xuan & Yoon, Seong-Min, 2021. "Does oil price variability affect the long memory and weak form efficiency of stock markets in top oil producers and oil Consumers? Evidence from an asymmetric MF-DFA approach," The North American Journal of Economics and Finance, Elsevier, vol. 57(C).
    2. Wang, Yudong & Liu, Li & Gu, Rongbao, 2009. "Analysis of efficiency for Shenzhen stock market based on multifractal detrended fluctuation analysis," International Review of Financial Analysis, Elsevier, vol. 18(5), pages 271-276, December.
    3. Lu, Jingen & Chen, Xiaohong & Liu, Xiaoxing, 2018. "Stock market information flow: Explanations from market status and information-related behavior," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 512(C), pages 837-848.
    4. Eom, Cheoljun & Kwon, Okyu & Jung, Woo-Sung & Kim, Seunghwan, 2010. "The effect of a market factor on information flow between stocks using the minimal spanning tree," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(8), pages 1643-1652.
    5. Lahmiri, Salim, 2017. "Cointegration and causal linkages in fertilizer markets across different regimes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 471(C), pages 181-189.

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