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Shannon Entropy: An Econophysical Approach to Cryptocurrency Portfolios
Noé Rodriguez-Rodriguez1, Octavio Miramontes1
1Departamento de Sistemas Complejos, Instituto de Física, Universidad Nacional Autónoma de México, Ciudad de México C.P. 04510, Mexico.
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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