Investigation of stock return volatility using Shannon entropy - evidence from ASEAN stock markets

Xuan Vinh Vo and Thi Tuan Anh Tran

Afro-Asian Journal of Finance and Accounting, 2022, vol. 12, issue 4, 479-490

Abstract: This study assesses stock market volatility in ASEAN countries. We use Shannon entropy as an alternative measure to traditional measure of stock return volatility. We utilise daily stock price data of national stock market indices of ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) for the period from August 2001 to December 2016. The results show that the stock returns of Vietnam (VNINDEX) is the most volatile stock index, followed by that of Indonesia, Singapore, Malaysia, Thailand and the Philippines. The study also suggests that entropy is an important alternative to the traditional measure of stock return volatility. The study offers important implication for risk management and portfolio theory.

Keywords: volatility of stock returns; standard deviation; entropy; entropy Shannon; probability density function. (search for similar items in EconPapers)
Date: 2022
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