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Evaluating Stock Market Price Variation in UNICEM and BUA PLC Using Markov Chain and Fundamental Matrix Approaches

Orji, Samuel Chukwuemeka, Anele, ThankGod Chinedu, and Odu-Ndom, Nkemdinim, Kaydee

Abstract

For any investment to be successful, daily activities must be regularly assessed in order to advance the investment. Therefore, one well-known and often used mathematical technique for forecasting future stock price fluctuations is stochastic analysis of Markov chains. This study used closing stock price data from the Nigeria Stock Exchange for the years 2020–2023 to examine the stochastic analysis of Markov chains for UNICEM Nigeria PLC and BUA Nigeria PLC. The solutions to the transition probability matrix were acquired separately. Expected mean rate of return and growth rates were taken into account. Also, UNICEM has the best likelihood of no change in price in the near future which advises an investor on the appropriate decision with respect to stock market price fluctuations for both short- and long-term investment plans separately. Finally, an increase in volatility with respect to time increases the future price movements through the trading days.

Keywords

Markov ChainFundamental MatrixNigeria Stock ExchangeVolatility

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