Journal Of Network Theory In Finance

Networks of log returns and volatilities of international stock market indexes

Leonidas Sandoval Junior

  • Networks based on log returns of stock market indices differ from networks based on their volatilities.
  • When dealing with log returns, networks are formed based on time zones of the markets the indices belong to; for Effective Transfer Entropy, though, a strong relation between indices of Middle Eastern countries is detected.
  • Node strengths of the networks obtained peak in years of crisis, such as the Global Economic Crisis of 2008 and the European Sovereign Debt Crisis of 2011, and also in the years that follow.

In this paper, we build dynamic networks based on correlation and transfer entropy (TE), using both the log returns and the volatilities (here associated with absolute values) of ninety-seven stock market indexes from various parts of the world between 2000 and 2016. The topologies of these networks are analyzed using node strength for networks based on correlation, and in and out node strengths for networks based on TE. Our results indicate that node strengths peak in times of crisis, such as the global financial crisis of 2008 and the European sovereign debt crisis, as well as in the years after 2010. Our results for volatilities also indicate strong relations between the indexes of Arab countries.

To continue reading...

You must be signed in to use this feature.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: