Effects of time dependency and efficiency on information flow in financial markets

Details Effects of time dependency and efficiency on information flow in financial markets Effects of time dependency and efficiency on information flow in financial markets

2008-02-11

arxiv.org/abs/0802.1500v1

Physica A 387(21), 5219-5224 (2008)

Economy

Quantitative Finance

Statistical Finance

Scientific paper

10.1016/j.physa.2008.05.054

We investigated financial market data to determine which factors affect information flow between stocks. Two factors, the time dependency and the degree of efficiency, were considered in the analysis of Korean, the Japanese, the Taiwanese, the Canadian, and US market data. We found that the frequency of the significant information decreases as the time interval increases. However, no significant information flow was observed in the time series from which the temporal time correlation was removed. These results indicated that the information flow between stocks evidences time-dependency properties. Furthermore, we discovered that the difference in the degree of efficiency performs a crucial function in determining the direction of the significant information flow.

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