An econophysics approach to analyse uncertainty in financial markets: an application to the Portuguese stock market

Andreia Dionisio, Rui Menezes () and D. A. Mendes ()

The European Physical Journal B: Condensed Matter and Complex Systems, 2006, vol. 50, issue 1, 161-164

Abstract: In recent years there has been a closer interrelationship between several scientific areas trying to obtain a more realistic and rich explanation of the natural and social phenomena. Among these it should be emphasized the increasing interrelationship between physics and financial theory. In this field the analysis of uncertainty, which is crucial in financial analysis, can be made using measures of physics statistics and information theory, namely the Shannon entropy. One advantage of this approach is that the entropy is a more general measure than the variance, since it accounts for higher order moments of a probability distribution function. An empirical application was made using data collected from the Portuguese Stock Market. Copyright EDP Sciences/Società Italiana di Fisica/Springer-Verlag 2006

Keywords: 89.70.+c Information theory and communication theory (for telecommunications, see 84.40.Ua; for optical communications, see 42.79.Sz), 89.65.Gh Economics; econophysics, financial markets, business and management, (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (23)

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DOI: 10.1140/epjb/e2006-00113-2

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