Market Efficiency And Information Flow Between Stocks With Different Systematic Risk Based On The Transfer Entropy

The approach of researching the complex system are being paid more and more attentions. These approach are applied into meteorology, economics and traffic flow research. Among these approaches, the non-linear approach have been occupying a big part. Transfer entropy is one of commonly used method for non-linear system. It combines the concepts of information, which is a measure of the interaction between subsystems in complex systems.Financial market is a typical complex system, input and output affected by multiple factors, coupled to each other between systems. In this paper, in order to transfer entropy as a tool to analyze the transmission of information in the Chinese A-share market and the Nikkei stock returns in order to test the effectiveness of the market, and identify Beta and whether the amount associated with the transmission of information. Topics include:(1) Introduces the basic theory of entropy of a random variable, information, transfer entropy.(2) The beta coefficient of assets is introduced, also the concept of efficient markets.(3) Based on yields of different windows were used to calculate the China A-shares and Nikkei Index10stocks’ beta.(4) Using stocks yield entropy based on different coarse-grained method to test market autocorrelation, and then test the weak form efficiency of Chinese A-shares and Nikkei market. And compare the results under different coarse-grained.(5) Using transfer entropy based on different coarse-grained method between different stocks of yield of Chinese A-share stocks and the Nikkei, and then test the weak market.(6) To investigate the influence of different beta stocks on the amount of information transmitted.