A New Markov Chain Stock Price Prediction Model

Portfolio management is an important factor that determines the performance of the portfolio. To perform well in the portfolio, it is not only essential to develop personal investment strategies, but analyzing current financial trend is also vital. Stock Trak is an online portfolio simulation that allows students to try out different investment strategies, and also get a hand on experience in what the real market trading conditions are. By managing the portfolio, I have acquired some new knowledge of investment strategies and also become more familiar with the current market by following closely to the financial headlines.

In order to study how stock prices react to these events, approximate three years of continuous daily stock price are chose, beginning at 17th March 2008 and ending more than three months after the final event at 22nd April 2011. In addition, SHANGHAI Stock Exchange Index (SSE) is adopted as a proxy of the market portfolio.

In order to succeed in any business, it is extremely important to understand the stock market. In this assignment we were asked to follow the stock market continuously for four months and understand the market. The stock market is a global marketplace, where goods and services are traded in the form of equities.

Random walk hypothesis of the Asian stock markets (Malaysia and Korea) strongly rejected examined by Huang (1995). Gordon and Rittenberg (1995) examines weak form efficiency do not apply on Warsaw Stock Exchange as prices are not fully reflect the information. There is some evidence suggested by Gilmore and McManus (2003), random walk hypothesis is rejected by his finding in this study from 1995 to 2000. Moreover, Vosvorda et al. (1998) analyse the Prague Stock Exchange and the weak form market efficiency rejected by this study for 1995 to 1997. Dahel and Laabas (1999) studied the market efficiency of Saudi Arabia, Bahrain and Oman markets reject the weak form of the EMH. It has been reported that. Hasan et al. (2007) shows the evidence on Karachi Stock Exchange in Pakinstan walk as the behaviour of price do not supporting random thus are not weak form efficient. In the view of Dima and Milos (2009), the long term financial instability experienced within the Romanian economy, the market’s information is limited to a weak form

2. The NYSE is defined as a “spot” market purely and simply because it has a physical location. The NASDAQ, on the other hand, is not a spot market because it has no one central location.

NASDAQ Inc. is a company that specializes in finances.The main thing that NASDAQ Inc. is known for is the NASDAQ stock market. The first stock market to be entirely electronic. They have many sub companies that focus on different things. One of which is NASDAQ Composite. It is a dedicated stock market index for the NASDAQ stock

The stock market is always fluctuating. While watching the stock market for the last three months I have noticed that it’s a continuous guessing game. One day your stock might gain several point then the very next it could drop. Luckily enough my stocks never dropped tremendously, the outcome of my stocks wasn’t as great as I would have hoped but I also didn’t lose any money. Each stock varied a little different than the other.

The Dow Jones Industrial Average and NASDAQ are both significant economic indicators. The Dow Jones was created by Charles Dow in 1896. “The Dow” is a price-weighted average of 30 significant stocks, most of which are traded on the New York Stock exchange. The NASDAQ is the National Association of Securities Dealers Automatic Quotation System. It is the first and largest electronic stock exchange in the world, consisting of more than 4000 stocks. Both the Dow Jones Industrial Average and NASDAQ are significant gauges of the current state of the economy. However, the NASDAQ is much larger and includes more than 4000 companies, while the Dow Jones only includes 30 companies. All of the NASDAQ stocks are also traded on the NASDAQ exchange,

In order to analyze the momentum effect of different specifications, stocks were divided into ‘winner’ stocks and ‘loser’ stocks according to their rankings.

Micro-cap stocks are traded through different methods than regular stocks. Because these stocks do not have the popularity to go through Wall Street or media, these stocks are traded through something alternative. Most micro-cap stocks are traded through a method known as “over-the-counter” ("Microcap Stock: A Guide for Investors", 2013). Over the counter means that it is not run through the national securities exchange ("Microcap Stock: A Guide for Investors", 2013).

Efficient capital market “It was generally believed that securities markets were extremely efficient in reflecting information about the stock market as a whole” (Fama 1970). To extent that when there is new information about stock rise, the news was dispersed immediately and it affects the security 's price at that time.

As indicated by the case study S&P 500 index was use as a measure of the total return for the stock market. Our standard deviation of the total return was used as a one measure of the risk of an individual stock. Also betas for individual stocks are determined by simple linear regression. The variables were: total return for the stock as the dependent variable and independent variable is the total return for the stock. Since the descriptive statistics were a lot, only the necessary data was selected (below table.)

Relatively accurate prediction of multi-tiered, non-linear events has long been a difficult and time-consuming task to perform; forecasting the movement of securities on the stock market included. Stock prices fluctuate for innumerable reasons, so correctly forecasting a stock’s movement can be extremely difficult. There are two areas that have massive effect on stock pricing: the psychology, or sentiment of investors and the mathematical, or analytical standpoint. In order to effectively predict stock price movement, these two areas, more than anything else, must be factored in. Fundamental and technical analysis are easily included, but accounting for investor sentiment is more complicated. Using artificial neural networks (ANNs) coupled with the two schools of traditional analysis and regression analysis could prove useful in correctly forecasting the price movement of stocks on any exchange. How can ANNs be implemented with regression analysis to accurately predict the movement of stock prices? This report will be a semi-technical feasibility analysis of the different types of ANNs, predictive algorithms and financial analysis

Efficient market hypothesis proposed by Fama (1965) suggested that all relevant information is immediately incorporated into current stock prices. Moreover, stock prices change when new information come. Since new information is unpredictable, EMH implies that stock prices follow a random walk.

A study on the factors that influenced Malaysian stock market index is carry out in order to measure the movement of Malaysian stock market with the concern of macroeconomic variables which include the money supply (M2), exchange rate (EXR), inflation rate (CPI) and also industrial production index (IPI).