My Ssec Capstone Project The fluctuation of prices of stock in capital markets across the globe was found to be random as well as non-random

The fluctuation of prices of stock in capital markets across the globe was found to be random as well as non-random

The fluctuation of prices of stock in capital markets across the globe was found to be random as well as non-random. In simple terms, for the price of stock to follow a random walk, its future price changes randomly based on all available information at that time, this is inclusive of its price history. This study employed a hidden markov model or HMM with time-varying parameters to assess if the stock price fluctuations of the Nigerian Stock Exchange (NSE) follow a random walk process, or not. Via hidden states, the HMM allows for periods with different volatility levels described by hidden states. Through acounting for the non-constant variance of the data with a two-state Hidden Markov Model then taking estimation into consideration via the Sequential Monte Carlo Expectation Maximisation (SMCEM) technique, this study finds no support of randomness. The journou concluded that the stock price fluctuations of the Nigerian stock exchange didnt pursue a random walk process

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