Random walk: statistical data analysis and application in finance

Yilin Chen

doi:10.1117/12.2639464

17 May 2022 Random walk: statistical data analysis and application in finance

Yilin Chen

Proceedings Volume 12259, 2nd International Conference on Applied Mathematics, Modelling, and Intelligent Computing (CAMMIC 2022); 122590E (2022) https://doi.org/10.1117/12.2639464
Event: 2nd International Conference on Applied Mathematics, Modelling, and Intelligent Computing, 2022, Kunming, China

Abstract

The random walk model is a well-known statistic model applied in a variety of fields. Contemporarily, a new diagnostic technique for identifying and exploiting patterns in financial products, e.g., the foreign exchange rate and stock price, has arisen. The random walk theory is still persuasive, prevailed dominated and admired by plenty of economists and statisticians. The aim of this paper is to examine the feasibility and application of random walk in finance with corresponding statistical analysis. It is started form performing a brief introduction on the research progress of random walk theory and principle of random walk model from a mathematical point of view. Subsequently, the performance of stock price and four structural exchange rates is investigated in this research where both univariate and multivariate tests are used in this model. According to the statistic tests, it is revealed that both stock price and foreign exchange rate follows a random walk pattern. Moreover, the price of one financial product is also independent of another product. Overall, these results shed light on rationality of random walk.

Citation Download Citation

Yilin Chen "Random walk: statistical data analysis and application in finance", Proc. SPIE 12259, 2nd International Conference on Applied Mathematics, Modelling, and Intelligent Computing (CAMMIC 2022), 122590E (17 May 2022); https://doi.org/10.1117/12.2639464

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