The Impact of Markov Chain and Properties of Fundamental Matrix Solution in the Analysis of Stock Market Price Variation in Finite Domain

Published: 2022-11-29

Page: 774-794

Department of Mathematics and Statistics, Ignatius Ajuru University of Education, Rumuolumeni, Port Harcourt, Nigeria.

Kanu, Nkechinyere Faith

Department of Mathematics and Statistics, Captain Elechi Amadi Polytechnic, Rumuola, Port Harcourt, Nigeria.

Anyamele, Bethel Azunna

Department of Mathematics and Statistics, Ignatius Ajuru University of Education, Rumuolumeni, Port Harcourt, Nigeria.

*Author to whom correspondence should be addressed.

Abstract

The success of any investment depends on regular assessment of daily activities in order to move an investment forward. So, stochastic analysis of Markov chain is well-known prevailing mathematical tools used for the prediction of future stock price changes. This paper studied the stochastic analysis of Markov chain in finite state for Dangote cement Nigeria PLC, Oando cement Nigeria PLC and Bua cement Nigeria PLC using closing stock price data of (2017-2021) extracted from Nigeria Stock Exchange. The transition probability matrix solutions were obtained independently. The growth rates, expected mean rate of return were considered. Also Dangote has the best probability of no change in price in the near future which informs an investor on the proper decision in respect to stock market price movements for both short and long term investment plans respectively. In the same vain, criteria were imposed to select four elements each from the transition matrix solutions independently. These four elements were logically extended to form a matrix that would help in predicting different commodity price processes, and the result obtained by exploring the properties of the fundamental matrix solution to assess the future price changes of each   company investment. Finally, an increase in volatility with respect to time increases the future price changes through the trading days.

Keywords: Markov chain, stock market prices, transition matrix, return rates and growth rates

How to Cite

Uchenna, A. I., Faith, K. N., & Azunna, A. B. (2022). The Impact of Markov Chain and Properties of Fundamental Matrix Solution in the Analysis of Stock Market Price Variation in Finite Domain. Asian Journal of Pure and Applied Mathematics, 4(1), 774–794. Retrieved from https://globalpresshub.com/index.php/AJPAM/article/view/1704

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