Effective transfer entropy approach to information flow between exchange rates and stock markets

Ahmet Sensoy, Cihat Sobaci, Sadri Sensoy and Fatih Alali

Chaos, Solitons & Fractals, 2014, vol. 68, issue C, 180-185

Abstract: We investigate the strength and direction of information flow between exchange rates and stock prices in several emerging countries by the novel concept of effective transfer entropy (an alternative non-linear causality measure) with symbolic encoding methodology. Analysis shows that before the 2008 crisis, only low level interaction exists between these two variables and exchange rates dominate stock prices in general. During crisis, strong bidirectional interaction arises. In the post-crisis period, the strong interaction continues to exist and in general stock prices dominate exchange rates.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chsofr:v:68:y:2014:i:c:p:180-185

DOI: 10.1016/j.chaos.2014.08.007

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