Granger Causality Graphs with Application to Information Transmission in International Stock Markets
Cai Feng-jin · 2014
The causal relations among components of multivariate time are expressed by Granger causality graph.The vertices,representing the components of the time series,are connected by directed edges according to the Granger causality relations between the variables whereas undirected edges correspond to contemporaneous dependence.The structure identification of Granger causality graph is proposed based on partial directed coherence.The validity of the proposed method is confirmed by simulations.At last,the method is applied to the detection of information transmission in major international financial market.Empirical results show that there is the strong connection between US,HK and other stock markets,Chinese stock market is weekly connected among the major international markets.The Regional segmentation of the major international financial markets is proved in this study.