We use an information-theoretic approach to interpret Engle's (1982) and Bollerslev's (1986) GARCH model as a model for the motion in time of the expected conditional second power moment. This interpretation is used to show how these models may be generalized, if we use alternative measures of...

This paper proposes the Shannon entropy as an appropriate one-dimensional measure of behavioural trading patterns in financial markets. The concept is applied to the illustrative example of algorithmic vs. non-algorithmic trading and empirical data from Deutsche Börse's electronic cash equity...

In this paper, we introduce a flexible and widely applicable nonparametric entropy-based testing procedure that can be used to assess the validity of simple hypotheses about a specific parametric population distribution. The testing methodology relies on the characteristic function of the...