Shannon Entropy: An Econophysical Approach to Cryptocurrency Portfolios.
ENTROPY (BASEL, SWITZERLAND) 2022;
24:e24111583. [PMID:
36359673 PMCID:
PMC9689520 DOI:
10.3390/e24111583]
[Citation(s) in RCA: 1] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Subscribe] [Scholar Register] [Received: 09/28/2022] [Revised: 10/28/2022] [Accepted: 10/30/2022] [Indexed: 06/01/2023]
Abstract
Cryptocurrency markets have attracted many interest for global investors because of their novelty, wide on-line availability, increasing capitalization, and potential profits. In the econophysics tradition, we show that many of the most available cryptocurrencies have return statistics that do not follow Gaussian distributions, instead following heavy-tailed distributions. Entropy measures are applied, showing that portfolio diversification is a reasonable practice for decreasing return uncertainty.
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