Okyu Kwon

Information flow between stock indices

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, while most receivers are in the Asia/Pacific region. According to the minimum spanning tree, the Standard and Poors 500 Index (GSPC) is located at the focal point of the information source for world stock markets.

Information flow between composite stock index and individual stocks

We investigate the strength and the direction of information transfer in the US stock market between the composite stock price index of stock market and prices of individual stocks using the transfer entropy. Through the directionality of the information transfer, we find that individual stocks are influenced by the index of the market.

Group dynamics of the Japanese market

We investigated the network structures of the Japanese stock market using the minimum spanning tree. We defined a grouping coefficient to test the validity of the conventional grouping by industrial categories, and found a decreasing in trend for the coefficient. This phenomenon supports the increasing external influences on the market due to globalization. To reduce this influence, we used S&P500 index as the international market and removed its correlation with every stock. We found stronger a grouping in this measurement when compared to the original analysis, which agrees with our assumption that the international market influences to the Japanese market.

Asymmetric information flow between market index and individual stocks in several stock markets

In this study, we observed asymmetric information flow between the stock market index and their component stocks using a transfer entropy measure. We found that the amount of information flow from an index to a stock is larger than from a stock to an index. This finding indicates that the market index is a major driving force in determining individual stocks. Interestingly, this asymmetry occurred in the same direction in every market studied from mature to emerging markets. However, the strength of the asymmetry was higher in mature markets than in emerging markets.