Forecasting Stock Prices using Markov Chains: Evidence from the Iraqi Stock Exchange
Keywords:
Forecasting, Markov chain, probability matrix, Transition MatrixAbstract
This paper aims to help investors in making investment decisions by analysing the projecting capability of chain model by Markov on the Iraq Stock Exchange (ISX60) index during January 2, 2024 to December 30, 2024, including (231) trading days. The application of this model requires identifying three cases for the movement of the Iraq Stock Exchange index, which are rise, fall, and stability. The transition matrix and probability vector were created, as the results showed that the probability of a decline in the movement of the Iraq’s Stock Exchange index was (0.489), which is the highest, while the probability of an increase in the index was (0.177), which is the lowest, and the probability of a stable movement of the index was (0.33).
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