Forecasting Stock Prices and Stock Index Values in the Uk Market
Autor: legend17 • June 19, 2016 • Research Paper • 7,698 Words (31 Pages) • 1,041 Views
The University of Westminster
Project
“Forecasting stock prices and stock index values in the UK market”
Submitted by: Bogdan Svyrydov (w153160262)
Course: Investment and Risk Finance
Supervised by: Dr. Vijay Shenai
2016
Executive summary
In the following research the main task was to analyse the capabilities of ARIMA models to provide accurate forecasts of values of stock indexes and stock prices. It was discovered that ARIMA models are better suited for short-term forecasts of stock indexes while these models give on average less precise forecasting results for individual stocks.
Moreover, it was found that an appropriate model for stock price forecasting is GARCH(1,1) model with ARMA as the mean equation. In addition, the conclusion was made that a one year time series is sufficient to provide forecasts for up to three days ahead while a five year time series can be considered for longer term predictions.
Table of contents
Chapter I. Introduction
Chapter II. Literature review.
Chapter III. Methodology.
Chapter IV. Data collection and analysis
Chapter VI. Discussions.
Chapter VII. Conclusion.
List of References
Chapter I. Introduction
Forecasting stock prices has been always a fascinated topic in finance, drawing attention of leading economists and investors throughout the world. This subject gains popularity due to the fact that all investment decisions are based on anticipations of positive future outcomes, therefore correct predictions of investment results allow investors to select profitable stocks and apply right timing strategies. However, in the stock market there are many interrelated factors affecting stock prices, which make forecasting a very complicated task. Moreover, Fama French (1965) in his study “The behavior of stock market prices” suggested that stock prices move in a random and unpredictable manner in the efficient market resulting in impossibility of consistent forecasting. Nevertheless, there are researchers and investment professionals, who are skeptical towards the efficient market hypothesis and believe in the possibility to create forecasting models that allow stock prices to be predicted with high accuracy.
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