In this paper we investigate the relationship between the information entropy of the distribution of intraday returns and intraday and daily measures of market risk. Using data on the EUR/JPY exchange rate, we find a negative relationship between entropy and intraday Value-at-Risk, and also between entropy and intraday Expected Shortfall. This relationship is then used to forecast daily Value-at-Risk, using the entropy of the distribution of intraday returns as a predictor.
No takes yet. Share an insight, caveat, or question.
Pele et al. (2017) studied this question.
Synapse has enriched 2 closely related papers on similar clinical questions. Consider them for comparative context: