Analysis of stock market information — a new financial engineering approach

In this paper we introduce a new financial engineering approach to the investigation of information flow between two world stock markets. We apply the one-way effect causal measure approach presented by Yao and Hosoya (2000) and Yao (2007) to the analysis of systematic information transmission between stock markets of China, the US and Japan. In view of a high technical time series modeling, we see that both of the information flows from New York stock market and Tokyo stock market to Shanghai stock market are strong and short-run. The reverse, the information flow from Shanghai stock market to New York stock market and also to Tokyo stock market are statistically existed but comparatively weak and very steady. The one-way effect approach is found to be successfully revealed transmission of stock market information.