Research on the examination of dependency of market, the asymmetry and the direction of contagion

YUAN Ying, WANG Mengdi, FAN Xiaoqian, ZHANG Tonghui

Systems Engineering - Theory & Practice ›› 2016, Vol. 36 ›› Issue (11) : 2778-2790.

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Systems Engineering - Theory & Practice ›› 2016, Vol. 36 ›› Issue (11) : 2778-2790. DOI: 10.12011/1000-6788(2016)11-2778-13

Research on the examination of dependency of market, the asymmetry and the direction of contagion

  • YUAN Ying1, WANG Mengdi2, FAN Xiaoqian1, ZHANG Tonghui1
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Abstract

Considering the financial markets' characteristics of the cross-correlation in the case of nonlinearity and non-normality, this paper mainly quantitative studies the dependency of the CSI 300 futures market and spot market by applying detrend cross-correlation analysis, multifractal asymmetric detrend cross-correlation analysis method and detrend cross-correlation analysis based on the time-delay, which are more in line with the financial market. The results show that there are obvious cross-correlation characteristics between futures and spot markets in China, and the cross-correlation is multifractal; When futures market and spot market have different trends, the two markets shows that the cross-correlation is asymmetric, and the long-range cross-correlation is more significant while the futures market and spot market with downtrends. The direction of transmission of the cross-correlation between the markets is bidirectional, as well as the two market are more sensitive to the information in a short time and response more quickly. When futures market or spot market less lag 5 days respectively, futures market has a greater impact on the spot market. The results will provide a better reference for the nonlinear dependency between markets and the complex mechanism.

Key words

asymmetric dependency / detrend cross-correlation analysis / time delayed detrend cross-correlation analysis

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YUAN Ying , WANG Mengdi , FAN Xiaoqian , ZHANG Tonghui. Research on the examination of dependency of market, the asymmetry and the direction of contagion. Systems Engineering - Theory & Practice, 2016, 36(11): 2778-2790 https://doi.org/10.12011/1000-6788(2016)11-2778-13

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Funding

National Natural Science Foundation of China (71271047); Program for New Century Excellent Talents in University of Ministry of Education of China (NCET-13-0115); Fundamental Research Funds for the Central Universities (N140604004); Liaoning Provincial Natural Science Foundation of China (2015020077)
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