This paper analyzes stock price behaviour on Ghana Stock Exchange (GSE) and develops a stochastic model to predict the behaviour of stock prices on the exchange using Monte Carlo simulations. The first part looks at the various justifications and models that have been put forward to explain stock behaviour and its distribution elsewhere. It traces the foundations of the use of stochastic process as a means of predicting stock price behaviour from Louis Bachelier normality assumption to the works of Samuelson’s lognormal supposition through to the doctoral thesis of Fama French in which he premised the behaviour of stock price to the idea of a random walk. We subsequently apply the Geometric Brownian Motion formulation to simulate stock price behaviour for all listed stocks on the GSE for the coming year (2015) using historical volatility and mean returns of the previous year (2014). The results find increasing evidence that the stochastic model consistently predict the stock price behaviour on the exchange in more than 80% of the listed stocks.
| Published in | International Journal of Systems Science and Applied Mathematics (Volume 2, Issue 6) |
| DOI | 10.11648/j.ijssam.20170206.12 |
| Page(s) | 116-125 |
| Creative Commons |
This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited. |
| Copyright |
Copyright © The Author(s), 2024. Published by Science Publishing Group |
Stock Price, Geometric Brownian Motion, Stock return, Stock Volatility, Monte Carlo Simulation
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APA Style
Osei Antwi. (2017). Stochastic Modeling of Stock Price Behavior on Ghana Stock Exchange. International Journal of Systems Science and Applied Mathematics, 2(6), 116-125. https://doi.org/10.11648/j.ijssam.20170206.12
ACS Style
Osei Antwi. Stochastic Modeling of Stock Price Behavior on Ghana Stock Exchange. Int. J. Syst. Sci. Appl. Math. 2017, 2(6), 116-125. doi: 10.11648/j.ijssam.20170206.12
AMA Style
Osei Antwi. Stochastic Modeling of Stock Price Behavior on Ghana Stock Exchange. Int J Syst Sci Appl Math. 2017;2(6):116-125. doi: 10.11648/j.ijssam.20170206.12
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Download@article{10.11648/j.ijssam.20170206.12,
author = {Osei Antwi},
title = {Stochastic Modeling of Stock Price Behavior on Ghana Stock Exchange},
journal = {International Journal of Systems Science and Applied Mathematics},
volume = {2},
number = {6},
pages = {116-125},
doi = {10.11648/j.ijssam.20170206.12},
url = {https://doi.org/10.11648/j.ijssam.20170206.12},
eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijssam.20170206.12},
abstract = {This paper analyzes stock price behaviour on Ghana Stock Exchange (GSE) and develops a stochastic model to predict the behaviour of stock prices on the exchange using Monte Carlo simulations. The first part looks at the various justifications and models that have been put forward to explain stock behaviour and its distribution elsewhere. It traces the foundations of the use of stochastic process as a means of predicting stock price behaviour from Louis Bachelier normality assumption to the works of Samuelson’s lognormal supposition through to the doctoral thesis of Fama French in which he premised the behaviour of stock price to the idea of a random walk. We subsequently apply the Geometric Brownian Motion formulation to simulate stock price behaviour for all listed stocks on the GSE for the coming year (2015) using historical volatility and mean returns of the previous year (2014). The results find increasing evidence that the stochastic model consistently predict the stock price behaviour on the exchange in more than 80% of the listed stocks.},
year = {2017}
}
TY - JOUR T1 - Stochastic Modeling of Stock Price Behavior on Ghana Stock Exchange AU - Osei Antwi Y1 - 2017/11/14 PY - 2017 N1 - https://doi.org/10.11648/j.ijssam.20170206.12 DO - 10.11648/j.ijssam.20170206.12 T2 - International Journal of Systems Science and Applied Mathematics JF - International Journal of Systems Science and Applied Mathematics JO - International Journal of Systems Science and Applied Mathematics SP - 116 EP - 125 PB - Science Publishing Group SN - 2575-5803 UR - https://doi.org/10.11648/j.ijssam.20170206.12 AB - This paper analyzes stock price behaviour on Ghana Stock Exchange (GSE) and develops a stochastic model to predict the behaviour of stock prices on the exchange using Monte Carlo simulations. The first part looks at the various justifications and models that have been put forward to explain stock behaviour and its distribution elsewhere. It traces the foundations of the use of stochastic process as a means of predicting stock price behaviour from Louis Bachelier normality assumption to the works of Samuelson’s lognormal supposition through to the doctoral thesis of Fama French in which he premised the behaviour of stock price to the idea of a random walk. We subsequently apply the Geometric Brownian Motion formulation to simulate stock price behaviour for all listed stocks on the GSE for the coming year (2015) using historical volatility and mean returns of the previous year (2014). The results find increasing evidence that the stochastic model consistently predict the stock price behaviour on the exchange in more than 80% of the listed stocks. VL - 2 IS - 6 ER -
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