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Quantifying the Information Flow between Ghana Stock Market Index and Its Constituents Using Transfer Entropy
- Source :
- Mathematical Problems in Engineering, Vol 2020 (2020)
- Publication Year :
- 2020
- Publisher :
- Hindawi Limited, 2020.
-
Abstract
- We quantify the strength and the directionality of information transfer between the Ghana stock market index and its component stocks as well as observe the same among the individual stocks on the market using transfer entropy. The information flow between the market index and its components and among individual stocks is measured by the effective transfer entropy of the daily logarithm returns generated from the daily market index and stock prices of 32 stocks ranging from 2nd January 2009 to 16th February 2018. We find a bidirectional and unidirectional flow of information between the GSE index and its component stocks, and the stocks dominate the information exchange. Among the individual stocks, SCB is the most active stock in the information exchange as it is the stock that receives the highest amount of information, but the most informative source is EGL (an insurance company) that has the highest net information outflow while the most information sink is PBC that has the highest net information inflow. We further categorize the stocks into 9 stock market sectors and find the insurance sector to be the largest source of information which confirms our earlier findings. Surprisingly, the oil and gas sector is the information sink. Our results confirm the fact that other sectors including oil and gas mitigate their risk exposures through insurance companies and are always expectant of information originating from the insurance sector in relation to regulatory compliance issues. It is our firm conviction that this study would allow stakeholders of the market to make informed buy, sell, or hold decisions.
- Subjects :
- Information transfer
Article Subject
business.industry
General Mathematics
Fossil fuel
General Engineering
Unidirectional flow
Engineering (General). Civil engineering (General)
01 natural sciences
Stock market index
010305 fluids & plasmas
0103 physical sciences
QA1-939
Econometrics
Transfer entropy
Stock market
TA1-2040
010306 general physics
business
Mathematics
Information exchange
Stock (geology)
Subjects
Details
- ISSN :
- 15635147 and 1024123X
- Volume :
- 2020
- Database :
- OpenAIRE
- Journal :
- Mathematical Problems in Engineering
- Accession number :
- edsair.doi.dedup.....775344b3cf998f2cdbabf7542958b764