An entropy-based approach to stock market volatility: evidence from the G7’s market indices

Detalhes bibliográficos
Autor(a) principal: Bentes, S. R.
Data de Publicação: 2016
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10071/12932
Resumo: This paper examines the adequacy of entropy in assessing stock market volatility. To this end, we compare the traditional approach based on the standard deviation with the entropy method. In view of the fact that the Shannon entropy is only suitable for describing equilibrium systems we consider Renyi and Tsallis entropies, which are more appropriate to explain anomalous phenomena. We used a sample based on the daily returns of the G7's major stock market indices. The results show the limitations of the standard deviation-based approach in fully characterising volatility and highlight the potentialities of entropy as a measure of uncertainty.
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spelling An entropy-based approach to stock market volatility: evidence from the G7’s market indicesFinancial volatilityStock marketsEntropyStatistical physicsRiskEconophysicsUncertaintyStock tradingThis paper examines the adequacy of entropy in assessing stock market volatility. To this end, we compare the traditional approach based on the standard deviation with the entropy method. In view of the fact that the Shannon entropy is only suitable for describing equilibrium systems we consider Renyi and Tsallis entropies, which are more appropriate to explain anomalous phenomena. We used a sample based on the daily returns of the G7's major stock market indices. The results show the limitations of the standard deviation-based approach in fully characterising volatility and highlight the potentialities of entropy as a measure of uncertainty.Inderscience2017-04-12T14:48:03Z2016-01-01T00:00:00Z20162019-04-16T16:58:09Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10071/12932eng1748-503710.1504/IJISE.2016.078897Bentes, S. R.info:eu-repo/semantics/embargoedAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-11-09T17:58:51Zoai:repositorio.iscte-iul.pt:10071/12932Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T22:30:43.478481Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv An entropy-based approach to stock market volatility: evidence from the G7’s market indices
title An entropy-based approach to stock market volatility: evidence from the G7’s market indices
spellingShingle An entropy-based approach to stock market volatility: evidence from the G7’s market indices
Bentes, S. R.
Financial volatility
Stock markets
Entropy
Statistical physics
Risk
Econophysics
Uncertainty
Stock trading
title_short An entropy-based approach to stock market volatility: evidence from the G7’s market indices
title_full An entropy-based approach to stock market volatility: evidence from the G7’s market indices
title_fullStr An entropy-based approach to stock market volatility: evidence from the G7’s market indices
title_full_unstemmed An entropy-based approach to stock market volatility: evidence from the G7’s market indices
title_sort An entropy-based approach to stock market volatility: evidence from the G7’s market indices
author Bentes, S. R.
author_facet Bentes, S. R.
author_role author
dc.contributor.author.fl_str_mv Bentes, S. R.
dc.subject.por.fl_str_mv Financial volatility
Stock markets
Entropy
Statistical physics
Risk
Econophysics
Uncertainty
Stock trading
topic Financial volatility
Stock markets
Entropy
Statistical physics
Risk
Econophysics
Uncertainty
Stock trading
description This paper examines the adequacy of entropy in assessing stock market volatility. To this end, we compare the traditional approach based on the standard deviation with the entropy method. In view of the fact that the Shannon entropy is only suitable for describing equilibrium systems we consider Renyi and Tsallis entropies, which are more appropriate to explain anomalous phenomena. We used a sample based on the daily returns of the G7's major stock market indices. The results show the limitations of the standard deviation-based approach in fully characterising volatility and highlight the potentialities of entropy as a measure of uncertainty.
publishDate 2016
dc.date.none.fl_str_mv 2016-01-01T00:00:00Z
2016
2017-04-12T14:48:03Z
2019-04-16T16:58:09Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10071/12932
url http://hdl.handle.net/10071/12932
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv 1748-5037
10.1504/IJISE.2016.078897
dc.rights.driver.fl_str_mv info:eu-repo/semantics/embargoedAccess
eu_rights_str_mv embargoedAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Inderscience
publisher.none.fl_str_mv Inderscience
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron_str RCAAP
institution RCAAP
reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
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