A SIMPLE CASE-STUDY DEMONSTRATION ON THE ANALYSIS OF STOCK PRICES USING GEOMETRIC BROWNIAN MOTION

This study centered on the application of the Geometrical Brownian motion in the analysis ofstock prices. It featured the estimations of the drift of stock prices, the volatility of stock prices,and the expected values and the associated variances of stock prices at any given time, even inthe future. From the illustrative example presented, based on the study data from a Nigeriabased company (with coded name, Omega Ventures), the value of the drift of the weekly stockprices showed that, on the average, the stock prices of the company fell at the rate of 0.000339weekly for the four year period under study. With the value of volatility obtained revealed that,on the average, the weekly changes in the company’s stock prices vary at the rate of 0.020567 –which is considered relatively low – an indication of the estimability of the company’s futurestock prices. Finally, the future stock prices of the company were estimated, and there was adecrease in stock prices with time within the four year period under study, though it was veryminute. Also, there was an increase in the variance of stock prices as the time interval increases.