The Application Of Dynamic Probability Distributions And Their Moments In The Stock Exchange Market To Create A Basic Trading Strategy
In this study I explore the use of statistics concepts and statistical software to
visualize the behavior of security prices and apply this in making of decisions
on investment.It was assumed that the distribution of security prices can be
described by existing statistical distributions.Stock prices for the Microsoft
Corporation from the year 2000-2015 was used as sample data to decide
which distribution best describes the sample package to illustrate our view
of the stock prices sensitivity to changes in certain parameters.From graphs
of past price movements,I am able to observe the lognormal distribution as
the distribution that would best predict future stock prices even though it
is high well known fact that stock prices can be very volatile.The Geometric
Brownian Motion was also mentioned briefly as a model used for studying
the movement of stock prices over time.