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

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.

SUBMITTER: Chen X

PROVIDER: S-EPMC5560545 | biostudies-literature | 2017

REPOSITORIES: biostudies-literature

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

Chen Xiurong X Tian Yixiang Y Zhao Rubo R

PloS one 20170817 8

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 ...[more]

PMID: 28817712

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