Simulating Stock Prices Using Geometric Brownian Motion: Evidence from Australian Companies

  • Australasian Accounting Business and Finance Journal, January 2016, University of Wollongong Library
  • DOI: 10.14453/aabfj.v10i3.3

Can stock prices predict using a Brownian Motion?

What is it about?

This study uses the geometric Brownian motion (GBM) method to simulate stock price paths, and tests whether the simulated stock prices align with actual stock returns.

Perspectives

Dr Krishna Reddy
University of Waikato

This is the first study and the literature relating to the testing of the GBM assumptions are very limited. Future research involving different periods with different start dates could be considered. Other modifications could also be used to further the reliability of the model, such as a model incorporating jumps. Also, it would be interesting to compare the accuracy of the RIM and GBM model in predicting stock prices..

Read Publication

http://dx.doi.org/10.14453/aabfj.v10i3.3

The following have contributed to this page: Dr Krishna Reddy and Dr Krishna Reddy