A CEEMDAN-Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS
We model a mixture of asymmetric and nonlinear bidirectional and unidirectional causality between four macroeconomic variables (exchange rate, GDP, global economic policy uncertainty, and relative CPI) and stock returns of BRICS economies in the frequency-domain using the information flow theory. Th...
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| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
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Wiley
2022-01-01
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| Series: | Complexity |
| Online Access: | http://dx.doi.org/10.1155/2022/7871109 |
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| _version_ | 1832549211338440704 |
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| author | Emmanuel Asafo-Adjei Anokye Mohammed Adam Peterson Owusu Junior Patrick Kwashie Akorsu Clement Lamboi Arthur |
| author_facet | Emmanuel Asafo-Adjei Anokye Mohammed Adam Peterson Owusu Junior Patrick Kwashie Akorsu Clement Lamboi Arthur |
| author_sort | Emmanuel Asafo-Adjei |
| collection | DOAJ |
| description | We model a mixture of asymmetric and nonlinear bidirectional and unidirectional causality between four macroeconomic variables (exchange rate, GDP, global economic policy uncertainty, and relative CPI) and stock returns of BRICS economies in the frequency-domain using the information flow theory. The Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (CEEMDAN)-based Rényi effective transfer entropy approach is used to establish dynamic flow of information between macroeconomic variables and stock returns of BRICS. The original return series suggested insignificant information flow between most macroeconomic variables and stock returns. However, we reveal both asymmetric and tail dependent analyses at diverse scales between macroeconomic variables and stock returns of BRICS economies. Moreover, we find negative significant flow of information between the variables, in that knowing the history of one variable (either stock or macroeconomic variable), in this case, indicates considerably more uncertainty than knowing the history of only the other variable (either stock or macroeconomic variable). We also observe that global economic policy uncertainty has the most significant adverse causal relationship with stock returns of BRICS, especially in the long term. These results have important implications that investors and policymakers should take into account. Regulators should consider instituting sound policy actions geared towards minimising long-term effects of external shocks and uncertainties. |
| format | Article |
| id | doaj-art-03d320e868b74f2c86fef2471e86dc2a |
| institution | Kabale University |
| issn | 1099-0526 |
| language | English |
| publishDate | 2022-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Complexity |
| spelling | doaj-art-03d320e868b74f2c86fef2471e86dc2a2025-02-03T06:11:52ZengWileyComplexity1099-05262022-01-01202210.1155/2022/7871109A CEEMDAN-Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICSEmmanuel Asafo-Adjei0Anokye Mohammed Adam1Peterson Owusu Junior2Patrick Kwashie Akorsu3Clement Lamboi Arthur4Department of FinanceDepartment of FinanceDepartment of FinanceDepartment of FinanceDepartment of Accounting, Economic and FinanceWe model a mixture of asymmetric and nonlinear bidirectional and unidirectional causality between four macroeconomic variables (exchange rate, GDP, global economic policy uncertainty, and relative CPI) and stock returns of BRICS economies in the frequency-domain using the information flow theory. The Complete Ensemble Empirical Mode Decomposition with Adaptive Noise (CEEMDAN)-based Rényi effective transfer entropy approach is used to establish dynamic flow of information between macroeconomic variables and stock returns of BRICS. The original return series suggested insignificant information flow between most macroeconomic variables and stock returns. However, we reveal both asymmetric and tail dependent analyses at diverse scales between macroeconomic variables and stock returns of BRICS economies. Moreover, we find negative significant flow of information between the variables, in that knowing the history of one variable (either stock or macroeconomic variable), in this case, indicates considerably more uncertainty than knowing the history of only the other variable (either stock or macroeconomic variable). We also observe that global economic policy uncertainty has the most significant adverse causal relationship with stock returns of BRICS, especially in the long term. These results have important implications that investors and policymakers should take into account. Regulators should consider instituting sound policy actions geared towards minimising long-term effects of external shocks and uncertainties.http://dx.doi.org/10.1155/2022/7871109 |
| spellingShingle | Emmanuel Asafo-Adjei Anokye Mohammed Adam Peterson Owusu Junior Patrick Kwashie Akorsu Clement Lamboi Arthur A CEEMDAN-Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS Complexity |
| title | A CEEMDAN-Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS |
| title_full | A CEEMDAN-Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS |
| title_fullStr | A CEEMDAN-Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS |
| title_full_unstemmed | A CEEMDAN-Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS |
| title_short | A CEEMDAN-Based Entropy Approach Measuring Multiscale Information Flow between Macroeconomic Conditions and Stock Returns of BRICS |
| title_sort | ceemdan based entropy approach measuring multiscale information flow between macroeconomic conditions and stock returns of brics |
| url | http://dx.doi.org/10.1155/2022/7871109 |
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