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http://hdl.handle.net/10071/12932
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Title: An entropy-based approach to stock market volatility: evidence from the G7’s market indices
Authors: Bentes, S. R.
Keywords: Financial volatility
Stock markets
Entropy
Statistical physics
Risk
Econophysics
Uncertainty
Stock trading
Issue Date: 2016
Publisher: Inderscience
Abstract: 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.
Peer reviewed: yes
URI: http://hdl.handle.net/10071/12932
DOI: 10.1504/IJISE.2016.078897
ISSN: 1748-5037
Ciência-IUL: https://ciencia.iscte-iul.pt/id/ci-pub-32556
Appears in Collections:BRU-RI - Artigos em revistas científicas internacionais com arbitragem científica

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