Shahzad, S.J.H. and Nor, S.M. and Mensi, W. and Kumar, Ronald R. (2017) Examining the efficiency and interdependence of US credit and stock markets through MF - DFA and MF - DXA approaches. Physica A: Statistical Mechanics and its Applications, 471 . pp. 351-363. ISSN 0378-4371
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Abstract
This study examines the power law properties of 11 US credit and stock markets at the industry level. We use multifractal detrended fluctuation analysis (MF-DFA) and multifractal detrended cross-correlation analysis (MF-DXA) to first investigate the relative efficiency of credit and stock markets and then evaluate the mutual interdependence between CDS-equity market pairs. The scaling exponents of the MF-DFA approach suggest that CDS markets are relatively more inefficient than their equity counterparts. However, Banks and Financial credit markets are relatively more efficient. Basic Materials (both CDS and equity indices) is the most inefficient sector of the US economy. The cross-correlation exponents obtained through MF-DXA also suggest that the relationship of the CDS and equity sectors within and across markets is multifractal for all pairs. Within the CDS market, Basic Materials is the most dependent sector, whereas equity market sectors can be divided into two distinct groups based on interdependence. The pair-wise dependence between Basic Materials sector CDSs and the equity index is also the highest. The degree of cross-correlation shows that the sectoral pairs of CDS and equity markets belong to a persistent cross-correlated series within selected time intervals.
| Item Type: | Journal Article |
|---|---|
| Subjects: | H Social Sciences > HA Statistics H Social Sciences > HG Finance |
| Divisions: | Faculty of Business and Economics (FBE) > School of Accounting and Finance |
| Depositing User: | Ronald Kumar |
| Date Deposited: | 02 Jan 2017 22:33 |
| Last Modified: | 02 Jan 2017 22:33 |
| URI: | http://repository.usp.ac.fj/id/eprint/9555 |
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