Title: Investigation of stock return volatility using Shannon entropy - evidence from ASEAN stock markets

Authors: Xuan Vinh Vo; Thi Tuan Anh Tran

Addresses: Institute of Business Research, University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu Street, District 3, Ho Chi Minh City, Vietnam; CFVG Ho Chi Minh City, University of Economics Ho Chi Minh City, 91 Ba Thang Hai Street, District 10, Ho Chi Minh City, Vietnam ' School of Mathematics and Statistics, University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu Street, District 3, Ho Chi Minh City, Vietnam

Abstract: This study assesses stock market volatility in ASEAN countries. We use Shannon entropy as an alternative measure to traditional measure of stock return volatility. We utilise daily stock price data of national stock market indices of ASEAN countries (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) for the period from August 2001 to December 2016. The results show that the stock returns of Vietnam (VNINDEX) is the most volatile stock index, followed by that of Indonesia, Singapore, Malaysia, Thailand and the Philippines. The study also suggests that entropy is an important alternative to the traditional measure of stock return volatility. The study offers important implication for risk management and portfolio theory.

Keywords: volatility of stock returns; standard deviation; entropy; entropy Shannon; probability density function.

DOI: 10.1504/AAJFA.2022.125059

Afro-Asian Journal of Finance and Accounting, 2022 Vol.12 No.4, pp.479 - 490

Received: 04 Sep 2018
Accepted: 10 Mar 2019
Published online: 25 Aug 2022 *

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