COVID-19 as Information Transmitter to Global Equity Markets: Evidence from CEEMDAN-Based Transfer Entropy Approach. (27th August 2021)

• Record Type: Journal Article
• Authors: Owusu Junior, Peterson; Frimpong, Siaw; Adam, Anokye M.; Agyei, Samuel K.; Gyamfi, Emmanuel N.; Agyapong, Daniel; Tweneboah, George
• Other Names: Li Yuxing Academic Editor.
• Is Part Of: Mathematical problems in engineering. Volume 2021(2021)
• Publication Date: 2021-08-27
• Subjects: Engineering mathematics -- Periodicals; 510.2462
• DOI: 10.1155/2021/8258778
• Languages: English
• ISSNs: 1024-123X

Abstract

Abstract : This study provides an analysis of chaotic information transmission from the COVID-19 pandemic to global equity markets in a novel denoised frequency domain entropy framework. The current length of the pandemic data offers the opportunity to examine its role in the asymmetric behaviour patterns of investors according to time horizons and the diversification potentials available to them. We employ the total daily global confirmed cases of COVID-19 and 27 equity indices from December 31, 2019, to April 18, 2021. Our results corroborate the idea that diversification potentials are stronger in the short to medium term. The Global Index (higher risk) and Canada and New Zealand (lower risk) remain at both ends to pair some other equities to offer diversification prospects because of the transmission of information from COVID-19 to the selected equity markets. In addition, we provide the source of these diversification prospects as information flow rather than transmission of shocks, which is common in the literature. Furthermore, our results suggest detailed levels of risk (lower vis-à-vis higher) in the situation where they have been stripped of the noise in the market. The findings allow both investors and policymakers to make informed decisions based on the time horizons since the pandemic communicates different chaotic information with the lapse of time. This is imperative to avoid the negative consequences of the increasing infection rate on global stock markets.