Entropy trading strategies reveal inefficiencies in Japanese stock market

Levan Efremidze, Darrol J. Stanley and Clemens Kownatzki

International Review of Economics & Finance, 2021, vol. 75, issue C, 464-477

Abstract: We empirically test the weak-form of the Efficient Market Hypothesis on Japanese equity markets with trading strategies timing both large and small capitalization portfolios. We find some of the active trading strategies outperform respective buy-and-hold benchmarks. The timing signals were based on sample entropy algorithms, where low sample entropy calls for long positions, while high sample entropy signals for short positions. Our results provide new empirical evidence against the Efficient Market Hypothesis based on the Japanese equity market data.

Keywords: EWJ; SCJ; Entropy; Tokyo stock exchange; Efficient market hypothesis; Trading rules (search for similar items in EconPapers)
JEL-codes: G11 G14 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:75:y:2021:i:c:p:464-477

DOI: 10.1016/j.iref.2021.04.021

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