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Testing the efficacy of information transmission: is equity style index better than stock market index?

Lau, Wee-Yeap ; Lee, Chin

E+M Ekonomie a Management, 2015-07, Vol.18 (3), p.4-17 [Periódico revisado por pares]

Liberec: Technical University of Liberec

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Título:
Testing the efficacy of information transmission: is equity style index better than stock market index?
Autor: Lau, Wee-Yeap ; Lee, Chin
Assuntos: Aggregates ; Analysis ; Business cycles ; Capital markets ; Causality ; Correlation ; Economic activity ; Economic aspects ; Economic growth ; Economic indicators ; Equity ; Financial crisis ; Forecasting ; Forecasts and trends ; GNP ; Gross National Product ; Growth rate ; Indexes ; Information management ; Information systems ; Investment policy ; Investments ; Macroeconomics ; Malaysia ; Securities markets ; Stock exchange ; Stock exchanges ; Stock market indexes ; Stock markets ; Stock price indexes ; Studies ; Time series ; Variables
É parte de: E+M Ekonomie a Management, 2015-07, Vol.18 (3), p.4-17
Notas: ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
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Descrição: This paper examines the ability of equity style to predict future movement of composite leading economic index in a multivariate Granger causality framework. By comparing the efficacy of information transmission between equity style index and Bursa Malaysia Industrial Index, our results show that there is unidirectional causality from growth style to leading economic index. Second, there is also unidirectional flow from growth style to Bursa Malaysia Industrial Index. Third, there is a bidirectional relationship between growth style and KLCI broad market index. Finally, there is bidirectional causality between both growth style and value style. Further analysis from cross-correlation function reveals that growth style index is better than Bursa Malaysia Industrial Index. The former provides accurate and stronger cross-correlation with leading economic index. From these empirical evidences, it can be concluded that growth style index is a leading indicator which has more economic content than stock market index. It is better than stock market index in its efficacy of information transmission. The study brings to the awareness to policy makers and practitioners of the usefulness of equity style in constructing future leading economic index and early warning system of financial crisis.
Editor: Liberec: Technical University of Liberec
Idioma: Inglês;Tcheco

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Testing the efficacy of information transmission: is equity style index better than stock market index?

Lau, Wee-Yeap ; Lee, Chin

Liberec: Technical University of Liberec

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