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The reliability of geometric Brownian motion forecasts of S&P500 index values

Amit K. Sinha

Journal of Forecasting, 2021, vol. 40, issue 8, 1444-1462

Abstract: This manuscript extends the literature on the application of geometric Brownian motion. Forecasted drift and diffusion terms estimated separately and recursively are plugged into the framework to forecast S&P500 index values. Expected index values are estimated from 100,000 simulated index values and probabilities. The results of comparing expected index values with actual values indicate that although reliable predictions of S&P500 index values can be obtained at monthly, quarterly, and annual frequencies, the reliability may decrease in that order.

Date: 2021
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Handle: RePEc:wly:jforec:v:40:y:2021:i:8:p:1444-1462