A Two Model Approach OF Predicting Stock Pricesfor Capital Market
Keywords:
Weilbull distribution, Markov Chain, Stock prices and Mean Square Error (MSE)Abstract
In this study we examined the different methods for estimation of parameters of Weibull distribution, using Mean Square Error (MSE) as a criterion for selecting the best model. The result showed that Method of Moments outperformed other methods. In the same vein, the estimated results were used to form a transition matrix where Markov Chain was introduced and subjected to 2-step transition matrix and it was discovered that stock price data is stationary which satisfies the necessary and sufficient condition of Markov Chain. This implies that stock price data follows a random walk. Also, the stock price have no memory of the past history.References
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