Statistics and Data Analysis. Professor William Greene Stern School of Business Department of IOMS Department of Economics. Statistics and Data Analysis. Random Walk Models for Stock Prices. 1/30. A Model for Stock Prices. Preliminary:
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Professor William Greene
Stern School of Business
Department of IOMS
Department of Economics
Random Walk Modelsfor Stock Prices
We are 95% certain that logP25 is in the intervallogP0 + μ25 - 1.96σ25 to logP0 + μ25 + 1.96σ25. Continue to assume μ=0 so μ25 = 25(0)=0 and σ=0.02 so σ25 = 0.02(√25)=0.1Then, the interval is 3.6889 -1.96(0.1) to 3.6889 + 1.96(0.1)or 3.4929 to 3.8849.This means that we are 95% confident that P0 is in the rangee3.4929 = 32.88 and e3.8849 = 48.66