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We propose a risk factor for idiosyncratic entropy and explore the relationship between this factor and expected stock returns.

We estimate a cross-sectional model of expected entropy that uses several common risk factors to predict idiosyncratic entropy.

We find a negative relationship between expected idiosyncratic entropy and returns. Specifically, the Carhart alpha of a low expected entropy portfolio exceeds the alpha of a high expected entropy portfolio by −2.37% per month. We also find a negative and significant price of expected idiosyncratic entropy risk using the Fama-MacBeth cross-sectional regressions. Interestingly, expected entropy helps us explain the idiosyncratic volatility puzzle that stocks with high idiosyncratic volatility earn low expected returns.

We propose a risk factor of idiosyncratic entropy and explore the relationship between this factor and expected stock returns. Interestingly, expected entropy helps us explain the idiosyncratic volatility puzzle that stocks with high idiosyncratic volatility earn low expected returns.

Entrepreneurs prioritise and act on purposeful endeavours instigated to actions by the visions of profits and benefits in the perceived opportunities. In the state of maximum entropy, with disorderliness and disequilibrium, entrepreneurs select the preferred pathway, through the profit-sensing mechanism, with the best probability of success to bet on. Therefore, this paper unpacks the forces at work in the mechanism to explain how entrepreneurs respond to opportunity and interpret the signals to coalesce into organised actions.

This research is primarily a conceptual paper on entrepreneurial action and the mechanism leading to that action. It refers to thermodynamic principles and biological cases to explain the forces at work using mostly analogical comparisons and similarities.

This paper aims to present an alternative theoretical scaffolding for entrepreneurship researchers to explore non-rational entrepreneurial behaviours and actions in uncertain, unstable and non-equilibrium environments, thereby creating new and competing hypotheses under the backdrop of adaptive evolution and thermodynamics phenomena.

The discussion featuring instinctively and naturally forming responses cannot fully explain the real entrepreneurial action as there is an element of free will and choices that are not discussed. While strategic choice and free-will shape decisions, they are preceded first by the attraction of the gradients and the biased motion in the direction of profit-attractant.

There remain essential links and issues not addressed in this “natural science”, constituting life science and physical science, oriented entrepreneurship research and exploration. Conceptualising opportunity-as-artefact and entrepreneurship as design, significant incidences of entrepreneurial actions can be explained by the presence of gradients stimulating entrepreneurial actions.

This viewpoint of information causality in opportunity-as-artefact casts a new look at the venerable question of what causes entrepreneurial actions. Shane and Venkataraman brought into focus this conversation, initiating the conceptual definition of opportunity. To have entrepreneurship, entrepreneurial opportunities must come first. Figuring the signals arising from these opportunities and cueing entrepreneurs to action is the main focus of this study.

Considering the “mechanism” at work and the thermodynamical forces at play, the entrepreneurial design process appears to hold considerable promise for future research development.