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Portfolio theory, information theory and Tsallis statistics

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  • Trindade, Marco A.S.
  • Floquet, Sergio
  • Filho, Lourival M. Silva

Abstract

We developed a strategic of optimal portfolio based on information theory and Tsallis statistics. The growth rate of a stock market is defined by using q-deformed functions and we find that the wealth after n days with the optimal portfolio is given by a q-exponential function. In this context, the asymptotic optimality is investigated on causal portfolios, showing advantages of the optimal portfolio over an arbitrary choice of causal portfolios. Finally, we apply the formulation in a small number of stocks in brazilian stock market [B]3 and analyzed the results.

Suggested Citation

  • Trindade, Marco A.S. & Floquet, Sergio & Filho, Lourival M. Silva, 2020. "Portfolio theory, information theory and Tsallis statistics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 541(C).
    • Handle: RePEc:eee:phsmap:v:541:y:2020:i:c:s0378437119318370
    DOI: 10.1016/j.physa.2019.123277
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    1. Ioannis P. Antoniades & Leonidas P. Karakatsanis & Evgenios G. Pavlos, 2020. "Dynamical Characteristics of Global Stock Markets Based on Time Dependent Tsallis Non-Extensive Statistics and Generalized Hurst Exponents," Papers 2012.06856, arXiv.org, revised Apr 2021.
    2. Antoniades, I.P. & Karakatsanis, L.P. & Pavlos, E.G., 2021. "Dynamical characteristics of global stock markets based on time dependent Tsallis non-extensive statistics and generalized Hurst exponents," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 578(C).

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