Study of the cross-market effects of Brexit based on the improved symbolic transfer entropy GARCH model—An empirical analysis of stock–bond correlations

Xiurong Chen, Yixiang Tian and Rubo Zhao

PLOS ONE, 2017, vol. 12, issue 8, 1-14

Abstract: In this paper, we study the cross-market effects of Brexit on the stock and bond markets of nine major countries in the world. By incorporating information theory, we introduce the time-varying impact weights based on symbolic transfer entropy to improve the traditional GARCH model. The empirical results show that under the influence of Brexit, flight-to-quality not only commonly occurs between the stocks and bonds of each country but also simultaneously occurs among different countries. We also find that the accuracy of the time-varying symbolic transfer entropy GARCH model proposed in this paper has been improved compared to the traditional GARCH model, which indicates that it has a certain practical application value.

Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0183194

DOI: 10.1371/journal.pone.0183194

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