Situated Information Flow between Food Commodity and Regional Equity Markets: An EEMD‐Based Transfer Entropy Analysis

Agyei, Samuel Kwaku; Owusu, Peterson; Bossman, Ahmed; Arhin, Emmanuel Yaw

doi:10.1155/2022/3938331

Cited by 23 publications

(15 citation statements)

References 77 publications

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“…The DY-12 spillover index rather assumes a time-invariant connectedness between assets, suggesting that investors respond to spillovers similarly and that their response is unaffected by investment horizons. This is contrary to the heterogeneous markets hypothesis (HMH) [ 23 – 25 , 33 ] and adaptive market hypothesis (AMH) of Lo [ 22 ]. To get around this restriction, we employ the BK-18 spillover index, which is based on heterogeneous shock frequency responses.…”

Section: Introductioncontrasting

confidence: 57%

“…Investors would seek to maximise (mitigate) portfolio returns (risks) across investment horizons [ 7 , 23 , 24 ] and, hence, should they find themselves in tumult trading periods, it is optimal that they adapt to the heterogenous market responses based on their appetite for risks. This observation is supported by the AMH [ 22 ], HMH [ 23 – 25 , 33 ], and CMH [ 34 ].…”

Section: Practical Implicationsmentioning

confidence: 60%

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Spillovers and contagion between BRIC and G7 markets: New evidence from time-frequency analysis

et al. 2022

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We examine the time-frequency spillovers, contagion, and pairwise interrelations between the BRIC index and its constituents, and between BRIC and G7 economies. The extent of interdependencies between market blocs and their constituents needs to be ascertained in the time-frequency domain for efficient asset allocation and portfolio management. Accordingly, the Baruník and Křehlík spillover index is employed with daily data between 11th December 2015 and 28th May 2021. We find the overall and net spillovers between BRIC and G7 to be significant in the short-term, with France, Germany, and the UK transmitting the greatest shocks to BRIC markets. We find no significant evidence of any sporadic volatilities for the studied markets in the COVID-19 period across all frequencies. However, we reveal contagious spillovers between the BRIC and G7 economies across all time scales in 2017 and 2019, which respectively reflect the persistent effect of Brexit and the US-China trade tension. Our findings divulge that in the short-term (mid-to-long-term), France and the UK (Canada and the US), are the sources of contagion between the BRIC and G7 markets. From the net-pairwise spillovers, we report high connectedness between the BRIC index and its members. BRIC countries are found to be transmitters of net-pairwise spillovers to the G7 markets excluding Japan. We recommend portfolio diversification using BRIC and G7 stocks in the intermediate-to-long-term horizon, where spillovers are less concentrated. Additionally, since individual markets are impacted by their unique shocks, investors should pay close attention to these shocks when distributing assets. In the interim, policy-makers and governments across the globe should ensure effective liberalisation of their economies to encourage international trade flows to boost portfolio diversification.

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Section: Introductioncontrasting

confidence: 57%

Section: Practical Implicationsmentioning

confidence: 60%

Spillovers and contagion between BRIC and G7 markets: New evidence from time-frequency analysis

et al. 2022

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“…Virtually all the ETEs in the long term are negative with most ETEs proving significant. is communicates the principle that, in the long term, when all markets are saturated with available information, the situated information flow between commodities and equities results in comparable magnitudes, direction, and, to a large extent, significance [1,2,16,65]; hence, no undue advantage could be envisaged from the trade between global commodities and African equities.…”

Section: Implications Of Resultsmentioning

confidence: 99%

ICEEMDAN-Based Transfer Entropy between Global Commodity Classes and African Equities

Bossman

Agyei

2022

Mathematical Problems in Engineering

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We examine the information transfer dynamics between global commodity and African equity markets to test their efficiency levels in a denoised transfer entropy approach. Our findings in the short- and medium-term scales lend support to the alternative hypothesis of market efficiency, whereas the transfer entropies at the long-term scale lend support to the efficient market hypothesis and the long-term market efficiency. Investing in a single commodity results in high uncertainty when the return pattern (history) of African equities is acknowledged. Similarly, investing in any single African equity results in high return uncertainty whilst accounting for the history of commodity markets’ returns. Short-term traders could monitor the loopholes in the market efficiency levels between global commodities and African equities to take advantage of arbitrage when needed, whilst long-term investors are assured of efficient market dynamics between global commodity markets and African equities. Regulation of markets may need to strategically incorporate news items as they fall due to either market.

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“…Studies can also be conducted on other emerging markets whose financial markets are integrated for comparison within the emerging markets region. To cater for the time dimension in such analysis, the sliding window approach (see [61]) may be considered [68,[91][92][93][94][95][96].…”

Section: Discussionmentioning

confidence: 99%

A Nonlinear Approach to Quantifying Investor Fear in Stock Markets of BRIC

Asafo−Adjei

Bossman

Boateng

et al. 2022

Mathematical Problems in Engineering

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The information flow between BRIC and relevant volatilities constitutes a complex network, which needs comprehensive analysis. We provide a rigorous investigation of information flow among stock markets of BRIC and the US VIX in a frequency-domain paradigm. Henceforward, the variation mode decomposition-based entropy approach is employed for the examination of diverse investment horizons and market conditions. First, we find that under stressed market conditions (lower quantiles), significant negative information flow exists between the BRIC constituents and the BRIC composite index. Also, under benign market conditions, we reveal similar dynamics as found at the lower quantiles, which enhances diversification. However, during market booms, we document more positive information flow between the assets and relevant to the redeployment of portfolios. Second, at low probability events representing market stress, we document potential negative information flow amid the stock markets and the US VIX for most investment horizons. Notwithstanding, the US VIX has the potential of transmitting positive information to the stock markets. However, at high market performance, we find more positive information flow amid the BRIC markets and VIX, generally implying long-term efficiency. Investors, portfolio managers, risk managers, and policy-makers should be wary of the heterogeneous and adaptive behaviour of BRIC stock markets with the VIX.

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Situated Information Flow between Food Commodity and Regional Equity Markets: An EEMD‐Based Transfer Entropy Analysis

Cited by 23 publications

References 77 publications

Spillovers and contagion between BRIC and G7 markets: New evidence from time-frequency analysis

Spillovers and contagion between BRIC and G7 markets: New evidence from time-frequency analysis

ICEEMDAN-Based Transfer Entropy between Global Commodity Classes and African Equities

A Nonlinear Approach to Quantifying Investor Fear in Stock Markets of BRIC

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