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Path-dependence is a feature of capital markets.
We can determine that a causal assessment is required for the most evidence-based analysis of market complexity. This insight is evident, while underresearched. Our latest paper sheds light on which causality assessment techniques are most relevant and most widely used in the context of equity markets.

In this structured literature review, we study recent and relevant publications on causality testing in equity markets with the purpose of identifying which causality tests have most widely been used. Our sample consists of 191 journal articles published between 2010 – 2020, retrieved from Google Scholar and DeepDyve.

Following the introduction to the relevance of testing for causality in capital markets, we analyse the sample based on a set of 5 criteria: We plotted and described (1) the distribution of articles per year, (2) analyzed the journals’ reputation and assessed (3) the content of the articles in our sample. We show (4) what individual countries and regions were most frequently investigated by the literature and then (5) analyzed the causality test or methodology employed.

The results aim to provide clarity not only to academics, but also to finance and investment professionals in thinking about ways to include causality assessments into their work.

Get in touch, share your thoughts and enter the debate.
We are looking forward to the exchange.