Information flow between stock indices

TL;DR

This paper uses transfer entropy to analyze the direction and strength of information flow between global stock indices, revealing America as a major source and GSPC as a central hub.

Contribution

It applies transfer entropy to quantify information flow between stock markets and identifies key regional differences and the central role of GSPC.

Findings

America is the main source of information flow.

Asia/Pacific region receives the most information.

GSPC is a focal point in the information network.

Abstract

Using transfer entropy, we observed the strength and direction of information flow between stock indices. We uncovered that the biggest source of information flow is America. In contrast, the Asia/Pacific region the biggest is receives the most information. According to the minimum spanning tree, the GSPC is located at the focal point of the information source for world stock markets.