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Title: Financial networks based on Granger causality: A case study
Authors: Papana, Angeliki
Kyrtsou, Catherine
Kugiumtzis, Dimitris
Diks, Cees
Type: Article
Subjects: FRASCATI::Social sciences::Economics and Business::Econometrics
FRASCATI::Social sciences::Economics and Business::Finance
Keywords: Granger causality
Financial network
Issue Date: 15-Sep-2017
Source: Physica A: Statistical Mechanics and its Applications
Volume: 482
First Page: 65
Last Page: 73
Abstract: Connectivity analysis is performed on a long financial record of 21 international stock indices employing a linear and a nonlinear causality measure, the conditional Granger causality index (CGCI) and the partial mutual information on mixed embedding (PMIME), respectively. Both measures aim to specify the direction of the interrelationships among the international stock indexes and portray the links of the resulting networks, by the presence of direct couplings between variables exploiting all available information. However, their differences are assessed due to the presence of nonlinearity. The weighted networks formed with respect to the causality measures are transformed to binary ones using a significance test. The financial networks are formed on sliding windows in order to examine the network characteristics and trace changes in the connectivity structure. Subsequently, two statistical network quantities are calculated; the average degree and the average shortest path length. The empirical findings reveal interesting time-varying properties of the constructed network, which are clearly dependent on the nature of the financial cycle.
ISSN: 03784371
Other Identifiers: 10.1016/j.physa.2017.04.046
Appears in Collections:Department of Economics

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