Up to now I have simply been generating random numbers within a bound, such as 10-50, to use as stock price data. My most recent work has been to try and generate numbers that more accurately represent stock price data. To do so, I split the process of generating prices into multiple parts. For each day, I begin by generating a market factor which will be used for all stocks. This factor represents the market’s effect on stocks. For instance, a bull market would have a positive effect on all stocks while a depression market would have a negative effect on all stocks. Next, I generate factors for each individual stock taking the market factor into account. The price of each stock is then given as exp(stock factor). I will try to post the actual equations that I am using in my next post.
