On the globalization of stock markets: An application of Vector Error Correction Model, Mutual Information and Singular Spectrum Analysis to the G7 countries

This paper analyzes stock market relationships among the G7 countries between 1973 and 2009 using three different approaches: (i) a linear approach based on cointegration, Vector Error Correction (VECM) and Granger Causality; (ii) a nonlinear approach based on Mutual Information and the Global Correlation Coefficient; and (iii) a nonlinear approach based on Singular Spectrum Analysis (SSA). While the cointegration tests are based on regression models and capture linearities in the data, Mutual Information and Singular Spectrum Analysis capture nonlinear relationships in a non-parametric way. The framework of this paper is based on the notion of market integration and uses stock market correlations and linkages both in price levels and returns. The main results show that significant co-movements occur among most of the G7 countries over the period analyzed and that Mutual Information and the Global Correlation Coefficient actually seem to provide more information about the market relationships than the Vector Error Correction Model and Granger Causality. However, unlike the latter, the direction of causality is difficult to distinguish in Mutual Information and the Global Correlation Coefficient. In this respect, the nonlinear Singular Spectrum Analysis technique displays several advantages, since it enabled us to capture nonlinear causality in both directions, while Granger Causality only captures causality in a linear way. The results also show that stock markets are closely linked both in terms of price levels and returns (as well as lagged returns) over the 36 years analyzed

An econophysics approach to analyse uncertainty in financial markets: an application to the Portuguese stock market

In recent years there has been a closer interrelationship between several scientific areas trying to obtain a more realistic and rich explanation of the natural and social phenomena. Among these it should be emphasized the increasing interrelationship between physics and financial theory. In this field the analysis of uncertainty, which is crucial in financial analysis, can be made using measures of physics statistics and information theory, namely the Shannon entropy. One advantage of this approach is that the entropy is a more general measure than the variance, since it accounts for higher order moments of a probability distribution function. An empirical application was made using data collected from the Portuguese Stock Market.Comment: 8 pages, 2 figures, presented in the conference Next Sigma-Phi 200

On the globalization of stock markets: An application of VECM, SSA technique and mutual information to the G7?

This paper analyzes the process of stock market globalization on the basis of two different approaches: (i) the linear one, based on cointegration tests and vector error correction models (VECM); and (ii) the nonlinear approach, based on Singular Spectrum Analysis (SSA) and mutual information tests. While the cointegration tests are based on regression models and typically capture linearities in the data, mutual information and SSA are well suited for capturing global non-parametric relationships in the data without imposing any structure or restriction on the model. The data used in our empirical analysis were drawn from DataStream and comprise the natural logarithms of relative stock market indexes since 1973 for the G7 countries. The main results point to the conclusion that significant causal effects occur in this context and that mutual information and the global correlation coefficient actually provide more information on this process than VECM, but the direction of causality is difficult to distinguish in the former case. In this field, SSA shows some advantages, since it enabled us to capture the nonlinear causality in both directions. In all cases, however, there is evidence that stock markets are closely related in the long-run over the 36 years analyzed and, in this sense, one may say that they are globalized.Globalization; Market integration; VECM; Mutual information; SSA technique.

Long Memory and Volatility Clustering: is the empirical evidence consistent across stock markets?

Long memory and volatility clustering are two stylized facts frequently related to financial markets. Traditionally, these phenomena have been studied based on conditionally heteroscedastic models like ARCH, GARCH, IGARCH and FIGARCH, inter alia. One advantage of these models is their ability to capture nonlinear dynamics. Another interesting manner to study the volatility phenomena is by using measures based on the concept of entropy. In this paper we investigate the long memory and volatility clustering for the SP 500, NASDAQ 100 and Stoxx 50 indexes in order to compare the US and European Markets. Additionally, we compare the results from conditionally heteroscedastic models with those from the entropy measures. In the latter, we examine Shannon entropy, Renyi entropy and Tsallis entropy. The results corroborate the previous evidence of nonlinear dynamics in the time series considered.Comment: 8 pages; 2 figures; paper presented in APFA 6 conferenc

Mutual information: a dependence measure for nonlinear time series

This paper investigates the possibility to analyse the structure of unconditional or conditional (and possibly nonlinear) dependence in financial returns without requiring the specification of mean-variance models or a theoretical probability distribution. The main goal of the paper is to show how mutual information can be used as a measure of dependence in financial time series. One major advantage of this approach resides precisely in its ability to account for nonlinear dependencies with no need to specify a theoretical probability distribution or use of a mean-variance model.Mutual information, nonlinear dependence, market efficiency

IS PRICE TRANSMISSION SYMMETRIC OVER TRANSNATIONALVALUE CHAINS FOR CODFISH PRODUCTS ?

This paper uses a threshold adjustment methodology to find out whether price transmission over the cod value chain between Norway and Portugal is asymmetric. The basic setting relies on price theory and the relationship between prices in the fish market. Empirical tests of price transmission use a cointegration framework similar to many other non-stationary time series analyses. However, it appears that testing for asymmetric price transmission has not been done so often in the fish market, despite the recent availability of non-linear time series techniques designed to this end. TAR and M-TAR adjustment models can be used in this context. Our results show that while the three price series used in the cod value chain between Norway and Portugal are cointegrated, there is no evidence of asymmetric price adjustment in this market

Globalization and long-run co-movements in the stock market for the G7: An application of VECM under structural breaks

This paper analyzes the process of long-run co-movements and stock market globalization on the basis of cointegration tests and vector error correction (VEC) models. The cointegration tests used here allow for structural breaks to be explicitly modeled and breakpoints to be computed on a relative-time basis. The data used in our empirical analysis were drawn from Datastream and comprise the natural logarithms of relative stock market indexes since 1973 for the G7 countries. The main results point to the conclusion that significant causal cointegration effects occur in this context and that there is a long-run relationship that governs the worldwide process of market integration. Globalization, however, is a complex adjustment process and in many cases there is only evidence of weak market integration which means that non-proportional price transmission occurs in the market along with proportional changes. The worldwide markets, as expected, appear to be driven in general by the US stock market

Intralesional treatment with mesenchymal stem cells in horses with suspensory ligament desmitis and super cial digital exor tendonitis: a retrospective study

Mesenchymal stem cells (MSCs) promote the regeneration of scarless tendon tissue after injury. Various sources have been described and used to obtain MSCs, adipose tissue and bone-marrow are one of the most used. A population of 49 horses, that suffered superficial digital flexor tendonitis or suspensory ligament desmitis and were treated either with the combination of stromal vascular fraction and platelet rich plasma, or with allogenic bone marrow derived MSCs, was analyzed retrospectively. The influence of different factors (age, breed, discipline, injury chronicity, treated structure and type of MSCs used) on the outcome of the therapy was evaluated. The re-injury rate observed on the total population was 4% six months after MSC therapy, and 17,8% after 12 months. The results obtained are similar to results obtained in other studies that evaluated the therapeutic effect of MSCs in horses, encouraging the use of these cells in the treatment of tendinoligamentous disorders; Resumo: Tratamento intralesional com células estaminais mesenquimatosas em cavalos com desmite do ligamento suspensor e tendinite do tendão flexor superficial digital: um estudo retrospetivo. As células estaminais mesenquimatosas (MSCs) promovem regeneração de tecido tendinoso saudável após a lesão. Vários tecidos têm sido usados para obter MSCs, mas o tecido adiposo e a medula óssea têm sido os mais populares. Este estudo analisou retrospetivamente uma população de 49 cavalos, com tendinite do tendão flexor digital superficial ou desmite do ligamento suspensor, que foram tratados com uma combinação de fração estromal vascular com plasma rico em plaquetas, ou com células estaminais mesenquimatosas alogénicas derivadas de medula óssea, avaliando a influência de diversos fatores (idade, disciplina, raça, cronicidade da lesão, estrutura tratada e tipo de células estaminais usadas) sobre o resultado da terapia. A taxa de lesões recidivas na população em estudo era de 4% 6 meses depois do tratamento com células estaminais, e 17,8% após 12 meses. Os resultados obtidos neste estudo são semelhantes a outros estudos que avaliaram o mesmo tipo de terapias