Predictive Analytics in Capital Markets

Nitin Singh, Prakash Kumar Jha
2017 Asian Economic and Financial Review  
The paper is a practical application of the random walk model on stock price behaviour. The academic literature has moved beyond this random walk approach and the recent focus is now much more on how to improve the forecasts. Since the performance of the random walk model has been contextual, it is desirable that the model is tested in different contexts. Our model shows good results in the Indian context. This model is also useful for traders and investors looking to predict stock prices in
more » ... stock prices in the immediate future as the model accounts for changes in the immediate past. The paper's primary contribution is finding the applicability of the random walk model in the context of Indian capital market and improvement in forecast accuracy by introducing a smoothing constant in the model. The modification enables a self-correcting feature that inherently checks for drifts and accordingly 'corrects' the forecast for the next period.
doi:10.18488/journal.aefr/2017.7.3/102.3.279.294 fatcat:rhqybdblmbhu3ho66utr2kqfam