Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods

Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods

The information-theoretical concept transfer entropy is an ideal measure for detecting conditional independence, or Granger causality in a time series setting. The recent literature indeed witnesses an increased interest in applications of entropy-based tests in this direction. However, those tests...

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Main Authors: Cees Diks, Hao Fang
Format: Article
Language:English
Published: MDPI AG 2017-07-01
Series:Entropy
Subjects:
transfer entropy
Granger causality
nonparametric test
bootstrap
surrogate data
Online Access:https://www.mdpi.com/1099-4300/19/7/372
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spelling doaj-52cba767e6794412acf9836703b0568f2020-11-24T20:41:46ZengMDPI AGEntropy1099-43002017-07-0119737210.3390/e19070372e19070372Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling MethodsCees Diks0Hao Fang1CeNDEF, Amsterdam School of Economics, University of Amsterdam, 1018 WB Amsterdam, The NetherlandsCeNDEF, Amsterdam School of Economics, University of Amsterdam, 1018 WB Amsterdam, The NetherlandsThe information-theoretical concept transfer entropy is an ideal measure for detecting conditional independence, or Granger causality in a time series setting. The recent literature indeed witnesses an increased interest in applications of entropy-based tests in this direction. However, those tests are typically based on nonparametric entropy estimates for which the development of formal asymptotic theory turns out to be challenging. In this paper, we provide numerical comparisons for simulation-based tests to gain some insights into the statistical behavior of nonparametric transfer entropy-based tests. In particular, surrogate algorithms and smoothed bootstrap procedures are described and compared. We conclude this paper with a financial application to the detection of spillover effects in the global equity market.https://www.mdpi.com/1099-4300/19/7/372transfer entropyGranger causalitynonparametric testbootstrapsurrogate data
collection DOAJ
language English
format Article
sources DOAJ
author Cees Diks
Hao Fang
spellingShingle Cees Diks
Hao Fang
Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods
Entropy
transfer entropy
Granger causality
nonparametric test
bootstrap
surrogate data
author_facet Cees Diks
Hao Fang
author_sort Cees Diks
title Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods
title_short Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods
title_full Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods
title_fullStr Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods
title_full_unstemmed Transfer Entropy for Nonparametric Granger Causality Detection: An Evaluation of Different Resampling Methods
title_sort transfer entropy for nonparametric granger causality detection: an evaluation of different resampling methods
publisher MDPI AG
series Entropy
issn 1099-4300
publishDate 2017-07-01
description The information-theoretical concept transfer entropy is an ideal measure for detecting conditional independence, or Granger causality in a time series setting. The recent literature indeed witnesses an increased interest in applications of entropy-based tests in this direction. However, those tests are typically based on nonparametric entropy estimates for which the development of formal asymptotic theory turns out to be challenging. In this paper, we provide numerical comparisons for simulation-based tests to gain some insights into the statistical behavior of nonparametric transfer entropy-based tests. In particular, surrogate algorithms and smoothed bootstrap procedures are described and compared. We conclude this paper with a financial application to the detection of spillover effects in the global equity market.
topic transfer entropy
Granger causality
nonparametric test
bootstrap
surrogate data
url https://www.mdpi.com/1099-4300/19/7/372
work_keys_str_mv AT ceesdiks transferentropyfornonparametricgrangercausalitydetectionanevaluationofdifferentresamplingmethods
AT haofang transferentropyfornonparametricgrangercausalitydetectionanevaluationofdifferentresamplingmethods
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