An Information Flow Among Industry Sectors in the Korean Stock Market

An Information Flow Among Industry Sectors in the Korean Stock Market

We investigate the information flow among 22 industry sectors in the Korean stock market byusing the symbolic transfer entropy (STE) method. We consider the daily index of 22 industrysectors in the Korean Composite Stock Price Index (KOSPI) from January 3, 2000 to March 30,2012. We measure the degree of asymmetry in the information flow and the amount of informationflow among the industry sectors before, during, and after the subprime crisis in order to analyzehow to relate them to the market crisis. We find that the amount of information flow and thenumber of connectedness during the financial crisis in the Korean stock market are higher thanthose before and after the market crisis. In addition, we find the role of the insurance sector, whichis related to risk management, increases as information source after the crisis.

We investigate the information flow among 22 industry sectors in the Korean stock market byusing the symbolic transfer entropy (STE) method. We consider the daily index of 22 industrysectors in the Korean Composite Stock Price Index (KOSPI) from January 3, 2000 to March 30,2012. We measure the degree of asymmetry in the information flow and the amount of informationflow among the industry sectors before, during, and after the subprime crisis in order to analyzehow to relate them to the market crisis. We find that the amount of information flow and thenumber of connectedness during the financial crisis in the Korean stock market are higher thanthose before and after the market crisis. In addition, we find the role of the insurance sector, whichis related to risk management, increases as information source after the crisis.