American Journal of Applied Mathematics and Statistics. 2014, 2(4), 212-215
DOI: 10.12691/AJAMS-2-4-6
On Predicting the Long Run Behaviour of Nigerian Bank Stocks Prices: a Markov Chain Approach
Christian Elendu Onwukwe1 and Timothy Kayode Samson1,
1Department of Mathematics/Statistics and Computer Science, University of Calabar, Cross River State, Nigeria
Pub. Date: July 27, 2014
Cite this paper
Christian Elendu Onwukwe and Timothy Kayode Samson. On Predicting the Long Run Behaviour of Nigerian Bank Stocks Prices: a Markov Chain Approach.
American Journal of Applied Mathematics and Statistics. 2014; 2(4):212-215. doi: 10.12691/AJAMS-2-4-6
Abstract
This study examines the long run behaviour of the closing prices of the Nigerian bank stocks using Markov Chain. A total of eight (8) Nigerian bank stocks were randomly selected and data on their daily closing prices between 1st January, 2004 and 29th May, 2013 were collected secondarily through cashcrasft website. Then, variations in daily closing prices were classified into three states Markov Chain of drop, rise and stable. If the closing at day t+1 is greater than that of the day t, it was classified as rise, if that of the day t+1 is less than that of the day t, it was classified as drop but when the closing price for day t is same as that of the day t+1, it was classified as stable. Based on these classifications, transition probabilities, the limiting distribution of the transition matrix as well as the steady state transition probabilities were computed for each stock. Finding suggests that despite the current situation in the market, there is still hope for Nigerian bank stocks as some of these bank stocks tend to experience an increase in price in the long run as shown by the results of the steady state probability. Although, this finding is very informative and crucial to investors, stock brokers and other regulator in this sector, this finding is subject to unforeseen circumstances such as change in government policy, among many other factors. Despite these limitations, it is hope that the results of this study will very useful to investors, intending investors and other relevant stakeholders who are involve in stock trading.
Keywords
Markov Chain, transition probability, steady state probability
Copyright
This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit
http://creativecommons.org/licenses/by/4.0/
References
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[5] | Website visited www.cashcraft.com |
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