Entropic information theory applied to uncertainty in financial markets
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Universidade de Évora
Abstract
One of the most popular concepts used to measure the risk and the uncertainty is the variance and/or the standard-deviation. In this paper we explore the potentialities of the entropy as a measure of uncertainty in financial markets, and simultaneously verify if this measure take into account some basic assumptions of the portfolio management theory, namely the effect of diversification.
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Dionísio, A., Menezes, R. e Mendes, D. (2006.) Entropic information theory applied to uncertainty in financial markets in Proceedings of the Workshop Perspectives on Econophysics, editado por Andreia Dionísio, A. Heitor Reis e Rui N. Rosa, Universidade de Évora.