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Mean Reversion Model of Stock Price: Estimated Parameters

This model uses historical stock price and dividend payment data over 21 periods to predict future stock prices and dividends using mean reversion. It estimates parameters like the average return (rbar), standard deviation of returns (sigma), and the mean reversion coefficient (b) based on the historical data. The model then uses these parameters to generate predictions for stock prices and dividends in future periods.

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KUMPULAN PENULIS REVOLUSI
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98 views2 pages

Mean Reversion Model of Stock Price: Estimated Parameters

This model uses historical stock price and dividend payment data over 21 periods to predict future stock prices and dividends using mean reversion. It estimates parameters like the average return (rbar), standard deviation of returns (sigma), and the mean reversion coefficient (b) based on the historical data. The model then uses these parameters to generate predictions for stock prices and dividends in future periods.

Uploaded by

KUMPULAN PENULIS REVOLUSI
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Mean reversion model of stock pric

This model illustrates an analysis of historic data of 21 periods of stock price and dividend payments where some mean reversion i
used to predict the future stock price and dividend values. The topic 'mean reversion' provides a full explanation.

Period t Stock price St Dividend dt Return rt St+dt % dividend Estimated parameters


-20 98.21 5.72 103.93 5.5% rbar
-19 102.35 7.63 0.11 109.98 6.9% sigma
-18 100.51 6.42 0.04 106.93 6.0% b
-17 102.16 6.52 0.08 108.68 6.0%
-16 105.34 6.72 0.09 112.06 6.0%
-15 97.15 5.11 -0.03 102.26 5.0%
-14 98.46 4.64 0.06 103.10 4.5%
-13 95.8 5.04 0.02 100.84 5.0%
-12 94.49 6.03 0.05 100.52 6.0%
Historical

-11 91.28 5.83 0.03 97.11 6.0%


-10 93.76 4.93 0.08 98.69 5.0%
-9 91.05 4.29 0.02 95.34 4.5%
-8 94.08 4.95 0.08 99.03 5.0%
-7 94.87 3.95 0.05 98.82 4.0%
-6 94.98 6.06 0.06 101.04 6.0%
-5 98.62 5.19 0.09 103.81 5.0%
-4 97.89 4.08 0.03 101.97 4.0%
-3 93.51 5.97 0.02 99.48 6.0%
-20 -15
-2 98.87 4.66 0.10 103.53 4.5%
-1 97.91 4.61 0.04 102.52 4.5%
0 101.04 4.21 0.07 105.25 4.0%
1 111.47 4.64 0.10 116.11
2 108.43 6.92 0.03 115.35
3 105.30 5.54 0.02 110.84
Prediction

4 106.95 5.63 0.07 112.58


5 106.26 5.01 0.04 111.27
6 105.70 7.88 0.07 113.58
7 103.97 6.64 0.05 110.61
8 103.49 5.44 0.05 108.94
9 108.43 6.92 0.11 115.34
10 113.29 5.96 0.10 119.25
odel of stock price

where some mean reversion is assumed. The estimated parameters are then
xplanation.

Estimated parameters
0.0523474762
3.1%
39%

St+dt
140.00
Historic
130.00

0 105.25 120.00
1 116.11
110.00

100.00

90.00

80.00
Period t
-20 -15 -10 -5 0 5 10

Mean Return rt % dividend


0.0446 4%
0.0346 6%
0.0593 5%
0.0641 5%
0.0467 5%
0.0573 7%
0.0468 6%
0.0550 5%
0.0546 6%
0.0307 5%

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