The main objective of this paper is to assess how mutual information as a measure of
global dependence between stock markets and macroeconomic factors can overcome
some of the weaknesses of the traditional linear approaches commonly used in this
context. One of the advantages of mutual information is that it does not require any prior
assumption regarding the specification of a theoretical probability distribution or the
specification of the dependence model. This study focuses on the Portuguese stock
market where we evaluate the relevance of the macroeconomic and financial variables as
determinants of the stock prices behaviour.
JEL Classification: C14, C22, C32
Keywords: Nonlinear dependence, mutual information, macroeconomic and financial factors.