Modeling stock price dynamics on the Ghana Stock Exchange: A Geometric Brownian Motion approach (2403.13192v1)
Abstract: Modeling financial data often relies on assumptions that may prove insufficient or unrealistic in practice. The Geometric Brownian Motion (GBM) model is frequently employed to represent stock price processes. This study investigates whether the behavior of weekly and monthly returns of selected equities listed on the Ghana Stock Exchange conforms to the GBM model. Parameters of the GBM model were estimated for five equities, and forecasts were generated for three months. Evaluation of estimation accuracy was conducted using mean square error (MSE). Results indicate that the expected prices from the modeled equities closely align with actual stock prices observed on the Exchange. Furthermore, while some deviations were observed, the actual prices consistently fell within the estimated confidence intervals.
- Innocent Karangwa. Comparing south african financial markets behaviour to the geometric brownian motion process. 2008.
- Robert C Merton. Option pricing when underlying stock returns are discontinuous. Journal of financial economics, 3(1-2):125–144, 1976.
- Abdelmoula Dmouj. Stock price modelling: Theory and practice. Masters Degree Thesis, Vrije Universiteit, 2006.
- GS Ladde and Ling Wu. Development of modified geometric brownian motion models by using stock price data and basic statistics. Nonlinear Analysis: Theory, Methods & Applications, 71(12):e1203–e1208, 2009.
- Siti Nazifah Zainol Abidin and Maheran Mohd Jaffar. A review on geometric brownian motion in forecasting the share prices in bursa malaysia. World Applied Sciences Journal, 17(1):82–93, 2012.
- A methodology for stochastic analysis of share prices as markov chains with finite states. SpringerPlus, 3:1–11, 2014.
- Determining the return volatility of the ghana stock exchange before and during the covid-19 pandemic using the exponential garch model. SN Business & Economics, 3(1):21, 2022.
- Poisson process modeling of pure jump equities on the ghana stock exchange. Journal of Applied Mathematics and Physics, 10(10):3101–3120, 2022.
- Exchange rate and stock price nexus: Evidence from ghana. Journal of Social and Development Sciences, 12(4 (S)):9–15, 2021.
- Bayesian switching volatility models for analysing stock returns in ghana. Statistics, Politics and Policy, 13(2):235–254, 2022.
- Drivers of stock prices in ghana: an empirical mode decomposition approach. Mathematical Problems in Engineering, 2021:1–7, 2021.
- Continuous time processes in times of crisis: The case of gbm and cev models. 2011.
- Ruey S Tsay. Analysis of financial time series. John wiley & sons, 2005.