1185. Applicability of intraday entropy for high-frequency trading eliminating overnight anomaly
Invited abstract in session TC-7: Portfolio Risk Management, stream Risk Management in Commodities and Financial Markets .
Tuesday, 12:30-14:00Room: Clarendon GR.01
Authors (first author is the speaker)
| 1. | David Neděla
|
| Finance, VSB-TU Ostrava | |
| 2. | Aleš Kresta
|
| Department of Finance, Faculty of Economics, VSB-Technical University of Ostrava |
Abstract
This paper investigates the application of entropy on intraday data of stocks within the S&P 500 index to aid in preselecting assets for portfolio construction. In particular, we propose a new performance ratio incorporating intraday entropy, which is also used as a preselection tool. By analyzing the entropy performance ratio, we aim to identify stocks that exhibit desirable characteristics for portfolio inclusion, using a simple naive portfolio scheme to achieve a balanced allocation. Furthermore, we evaluate portfolio performance statistics to assess risk-return profiles. To ensure the robustness of our approach, we analyze the impact of different entropy computation settings and assess the marginal contribution of preselected assets to portfolio performance. These supplementary analyses demonstrate the adaptability and reliability of entropy-based preselection in diverse market conditions.
Keywords
- Finance and Banking
- Optimization Modeling
- Financial Modelling
Status: accepted
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