Work

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

Year: 2017

Type: article

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.

Source: PLoS ONE

DOI: 10.1371/journal.pone.0183194

Authors: Xiurong Chen, Yixiang Tian, Rubo Zhao

Institution: University of Electronic Science and Technology of China

Language: English

Topic: Financial Risk and Volatility Modeling

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $2,382

Funders: National Natural Science Foundation of China, National Social Science Fund of China