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- Title
The Tale of Two Financial Crises: An Entropic Perspective.
- Authors
Gençay, Ramazan; Gradojevic, Nikola
- Abstract
This paper provides a comparative analysis of stock market dynamics of the 1987 and 2008 financial crises and discusses the extent to which risk management measures based on entropy can be successful in predicting aggregate market expectations. We find that the Tsallis entropy is more appropriate for the short and sudden market crash of 1987, while the approximate entropy is the dominant predictor of the prolonged, fundamental crisis of 2008. We conclude by suggesting the use of entropy as a market sentiment indicator in technical analysis.
- Subjects
STOCK Market Crash, 1997; FINANCIAL crises; ENTROPY; FOREIGN exchange rate risk; STOCK market decline, 1998; TWENTIETH century; HISTORY
- Publication
Entropy, 2017, Vol 19, Issue 6, p244
- ISSN
1099-4300
- Publication type
Article
- DOI
10.3390/e19060244