Information transfer across intra/inter-structure of CDS and stock markets

We investigate the information flow between industrial sectors in credit default swap and stock markets in the United States based on transfer entropy. Both markets have been studied with respect to dynamics and relations. Our approach considers the intra-structure of each financial market as well as the inter-structure between two markets through a moving window in order to scan a period from 2005 to 2012. We examine the information transfer with different k, especially k = 3, k = 5 and k = 7. Analysis indicates that the cases with k = 3 and k = 7 show the opposite trends but similar characteristics. Change in transfer entropy for intra-structure of CDS market precedes that of stock market in view of the entire time windows. Abrupt rise and fall in inter-structural information transfer between two markets are detected at the periods related to the financial crises, which can be considered as early warnings. (C) 2017 Elsevier B.V. All rights reserved.
Publisher
ELSEVIER SCIENCE BV
Issue Date
2017-11
Language
English
Keywords

TRANSFER ENTROPY; FINANCIAL-MARKETS; INDIVIDUAL STOCKS; TIME-SERIES; FLOW; NETWORK; MODEL; INDEX

Citation

PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS, v.486, pp.118 - 126

ISSN
0378-4371
DOI
10.1016/j.physa.2017.05.084
URI
http://hdl.handle.net/10203/225585
Appears in Collection
PH-Journal Papers(저널논문)
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