Modified Brownian Motion Approach to Modelling Returns Distribution
Dhesi, G, Shakeel, MB and Xiao, L (2016). Modified Brownian Motion Approach to Modelling Returns Distribution. Wilmott. 82, pp. 74-77. https://doi.org/10.1002/wilm.10494
|Authors||Dhesi, G, Shakeel, MB and Xiao, L|
An innovative extension of Geometric Brownian Motion model is developed by incorporating a weighting factor and a stochastic function modelled as a mixture of power and trigonometric functions. Simulations based on this Modified Brownian Motion Model with optimal weighting factors selected by goodness of fit tests, substantially outperform the basic Geometric Brownian Motion model in terms of fitting the returns distribution of historic data price indices. Furthermore we attempt to provide an interpretation of the additional stochastic term in relation to irrational behaviour in financial markets and outline the importance of this novel model.
This is the peer reviewed version of the article in Wilmott, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1002/wilm.10494/full. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
|Journal citation||82, pp. 74-77|
|Digital Object Identifier (DOI)||https://doi.org/10.1002/wilm.10494|
|Web address (URL)||https://onlinelibrary.wiley.com/doi/abs/10.1002/wilm.10494|
|22 Mar 2016|
|Publication process dates|
|Deposited||19 Dec 2016|
|Accepted||01 Nov 2015|
|Accepted author manuscript|
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