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Randomness, Informational Entropy, and Volatility Interdependencies among the Major World Markets: The Role of the COVID-19 Pandemic
Entropy ( IF 2.7 ) Pub Date : 2020-07-30 , DOI: 10.3390/e22080833
Salim Lahmiri , Stelios Bekiros

The main purpose of our paper is to evaluate the impact of the COVID-19 pandemic on randomness in volatility series of world major markets and to examine its effect on their interconnections. The data set includes equity (Bitcoin and Standard and Poor’s 500), precious metals (Gold and Silver), and energy markets (West Texas Instruments, Brent, and Gas). The generalized autoregressive conditional heteroskedasticity model is applied to the return series. The wavelet packet Shannon entropy is calculated from the estimated volatility series to assess randomness. Hierarchical clustering is employed to examine interconnections between volatilities. We found that (i) randomness in volatility of the S&P500 and in the volatility of precious metals were the most affected by the COVID-19 pandemic, while (ii) randomness in energy markets was less affected by the pandemic than equity and precious metal markets. Additionally, (iii) we showed an apparent emergence of three volatility clusters: precious metals (Gold and Silver), energy (Brent and Gas), and Bitcoin and WTI, and (iv) the S&P500 volatility represents a unique cluster, while (v) the S&P500 market volatility was not connected to the volatility of Bitcoin, energy, and precious metal markets before the pandemic. Moreover, (vi) the S&P500 market volatility became connected to volatility in energy markets and volatility in Bitcoin during the pandemic, and (vii) the volatility in precious metals is less connected to volatility in energy markets and to volatility in Bitcoin market during the pandemic. It is concluded that (i) investors may diversify their portfolios across single constituents of clusters, (ii) investing in energy markets during the pandemic period is appealing because of lower randomness in their respective volatilities, and that (iii) constructing a diversified portfolio would not be challenging as clustering structures are fairly stable across periods.

中文翻译:

世界主要市场之间的随机性、信息熵和波动性相互依赖:COVID-19 大流行的作用

我们论文的主要目的是评估 COVID-19 大流行对世界主要市场波动系列随机性的影响,并检查其对它们相互关联的影响。该数据集包括股票(比特币和标准普尔 500)、贵金属(黄金和白银)和能源市场(西德州仪器、布伦特和天然气)。广义自回归条件异方差模型应用于收益序列。小波包香农熵是根据估计的波动率序列计算的,以评估随机性。采用分层聚类来检查波动率之间的相互联系。我们发现 (i) 标准普尔 500 指数波动性和贵金属波动性的随机性受 COVID-19 大流行的影响最大,而 (ii) 与股票和贵金属市场相比,能源市场的随机性受大流行的影响较小。此外,(iii) 我们展示了三个波动率集群的明显出现:贵金属(黄金和白银)、能源(布伦特原油和天然气)以及比特币和 WTI,以及 (iv) 标准普尔 500 波动率代表了一个独特的集群,而 (v ) 标准普尔 500 指数市场波动与大流行之前比特币、能源和贵金属市场的波动无关。此外,(vi) 标准普尔 500 指数市场波动与大流行期间能源市场的波动和比特币的波动有关,以及 (vii) 贵金属的波动与大流行期间能源市场的波动和比特币市场的波动的联系较少.
更新日期:2020-07-30
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