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The Tale of Two Financial Crises: An Entropic Perspective

Department of Economics, Simon Fraser University, 8888 University Drive, Burnaby, BC V5A 1S6, Canada
Department of Economics and Finance, College of Business and Economics, University of Guelph, 50 Stone Road East, Guelph, ON N1G 2W1, Canada
IÉSEG School of Management (LEM-CNRS), Lille 59000, France
Faculty of Technical Sciences, University of Novi Sad, Novi Sad 21000, Serbia
Author to whom correspondence should be addressed.
Academic Editors: Michael (Mike) Stutzer and Stelios Bekiros
Entropy 2017, 19(6), 244;
Received: 18 April 2017 / Revised: 12 May 2017 / Accepted: 19 May 2017 / Published: 24 May 2017
(This article belongs to the Special Issue Entropic Applications in Economics and Finance)
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. View Full-Text
Keywords: financial crisis; market sentiment; technical trading; risk management; entropy financial crisis; market sentiment; technical trading; risk management; entropy
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Gençay, R.; Gradojevic, N. The Tale of Two Financial Crises: An Entropic Perspective. Entropy 2017, 19, 244.

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