Analysis reveals a relationship between market sentiment, systematic risk, and information entropy in financial markets, suggesting important insights into market behavior.
This paper attempts to measures the information level of the market via information entropy defined in Gosh et. al. (2016).The relation between the information level of the market, systematic risk, and market sentiment is investigated.The sentiment of the market is measured by the analyst forecasts of the market, where the systematic risk is measured by the dynamically estimated corporate beta.In general, there is a positive relation between the analyst forecast (proxy for sentiment) and corporate beta (proxy for systematic risk).In addition, the relation between the corporate beta (proxy for systematic risk) and entropy level of the market (proxy for market information) is presented.
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直哉 竹澤 (2023) studied this question.
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