Stock Net Entropy: Evidence from the Chinese Growth Enterprise Market

By introducing net entropy into a stock network, this paper focuses on investigating the impact of network entropy on market returns and trading in the Chinese Growth Enterprise Market (GEM). In this paper, indices of Wu structure entropy (WSE) and SD structure entropy (SDSE) are considered as indicators of network heterogeneity to present market diversification. A series of dynamic financial networks consisting of 1066 daily nets is constructed by applying the dynamic conditional correlation multivariate GARCH (DCC-MV-GARCH) model with a threshold adjustment. Then, we evaluate the quantitative relationships between network entropy indices and market trading-variables and their bilateral information spillover effects by applying the bivariate EGARCH model. There are two main findings in the paper. Firstly, the evidence significantly ensures that both market returns and trading volumes associate negatively with the network entropy indices, which indicates that stock heterogeneity, which is negative with the value of network entropy indices by definition, can help to improve market returns and increase market trading volumes. Secondly, results show significant information transmission between the indicators of network entropy and stock market trading variables.

Which global stock indices trigger stronger contagion risk in the Vietnamese stock market? Evidence using a bivariate analysis

This paper extends recent investigations into risk contagion effects on stock markets to the Vietnamese stock market. Daily data spanning October 9, 2006 to May 3, 2012 are sourced to empirically validate the contagion effects between stock markets in Vietnam, and China, Japan, Singapore, and the US. To facilitate the validation of contagion effects with market-related coefficients, this paper constructs a bivariate EGARCH model of dynamic conditional correlation coefficients. Using the correlation contagion test and Dungey et al.?s (2005) contagion test, we find contagion effects between the Vietnamese and four other stock markets, namely Japan, Singapore, China, and the US. Second, we show that the Japanese stock market causes stronger contagion risk in the Vietnamese stock market compared to the stock markets of China, Singapore, and the US. Finally, we show that the Chinese and US stock markets cause weaker contagion effects in the Vietnamese stock market because of stronger interdependence effects between the former two markets.