Mutual Information Based Analysis for the Distribution of Financial Contagion in Stock Markets

Xudong Wang and Xiaofeng Hui

Discrete Dynamics in Nature and Society, 2017, vol. 2017, 1-13

Abstract:

This paper applies mutual information to research the distribution of financial contagion in global stock markets during the US subprime crisis. First, we symbolize the daily logarithmic stock returns based on their quantiles. Then, the mutual information of the stock indices is calculated and the block bootstrap approach is adopted to test the financial contagion. We analyze not only the contagion distribution during the entire crisis period but also its evolution over different stages by using the sliding window method. The empirical results prove the widespread existence of financial contagion and show that markets impacted by contagion tend to cluster geographically. The distribution of the contagion strength is positively skewed and leptokurtic. The average contagion strength is low at the beginning and then witnesses an uptrend. It has larger values in the middle stage and declines in the late phase of the crisis. Meanwhile, the cross-regional contagion between Europe and America is stronger than that between either America and Asia or Europe and Asia. Europe is found to be the region most deeply impacted by the contagion, whereas Asia is the least affected.

Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://downloads.hindawi.com/journals/DDNS/2017/3218042.pdf (application/pdf)
http://downloads.hindawi.com/journals/DDNS/2017/3218042.xml (text/xml)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hin:jnddns:3218042

DOI: 10.1155/2017/3218042

Access Statistics for this article

More articles in Discrete Dynamics in Nature and Society from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().