Practical Numerical C Programming: Finance, Engineering, and Physics Applications

© Philip Joyce 2020

P. JoycePractical Numerical C Programminghttps://doi.org/10.1007/978-1-4842-6128-6_4

4. Stock Price Prediction

Philip Joyce¹ 

(1)

Goostrey, UK

 

4.1 Two Parts to Stock Price Changes

Stock price prediction combines the Brownian motion theory of physics with the Monte Carlo theory of statistical mathematics. Put simply, Brownian motion just models the random motion of particles in gases and liquids. If we assumed that there was a general drift upward and to the right and we plotted the particles’ position in 2D over a period of seconds, the shape of the graph would be similar to that of the following graph in Figure 4-1 which shows stock price variation over a number of days.

Figure 4-1

Brownian Motion Illustration

This relates the general ...