ABSTRACT
This chapter focuses on the relationship between stock market dynamics and macroeconomic data which are mainly available at monthly frequencies. It suggests that the derived measure of singular value decomposition-based entropy (SvdEn) might be at least correlated with the dynamics of the aggregate stock market index. The chapter analyzes this issue by considering whether the two measures of entropy, the raw and the growth measures, have prediction power in terms of C. W. J. Granger causality with respect to macroeconomic and financial variables. It looks at the predictive and explanatory power of the entropy of financial networks with respect to several macroeconomic and financial variables of interest. The results show that the SvdEn of financial networks does have predictive power in terms of Granger causality and explanatory power in terms of regression analysis with respect to the variation in selected macroeconomic and financial variables.
