| Issue |
MATEC Web Conf.
Volume 68, 2016
2016 The 3rd International Conference on Industrial Engineering and Applications (ICIEA 2016)
|
|
|---|---|---|
| Article Number | 19002 | |
| Number of page(s) | 5 | |
| Section | Applications in Finance | |
| DOI | https://doi.org/10.1051/matecconf/20166819002 | |
| Published online | 01 August 2016 | |
Modeling Philippine Stock Exchange Composite Index Using Weighted Geometric Brownian Motion Forecasts
1 College of Science, Polytechnic University of the Philippines, Manila Philippines
2 Institute of Mathematics, University of the Philippines, Quezon City, Philippines
Philippine Stock Exchange Composite Index (PSEi) is the main stock index of the Philippine Stock Exchange (PSE). PSEi is computed using a weighted mean of the top 30 publicly traded companies in the Philippines, called component stocks. It provides a single value by which the performance of the Philippine stock market is measured. Unfortunately, these weights, which may vary for every trading day, are not disclosed by the PSE. In this paper, we propose a model of forecasting the PSEi by estimating the weights based on historical data and forecasting each component stock using Monte Carlo simulation based on a Geometric Brownian Motion (GBM) assumption. The model performance is evaluated and its forecast compared is with the results using a direct GBM forecast of PSEi over different forecast periods. Results showed that the forecasts using WGBM will yield smaller error compared to direct GBM forecast of PSEi.
© The Authors, published by EDP Sciences, 2016
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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