Article rejected by the Journal of
Financial Planning of the Financial Planning Association
Uncertainty
treatment in stock market modeling
Stanislaw
Raczynski
Universidad Panamericana
Augusto Rodin 498, 03910 Mexico City, Mexico
e-mail: stanracz@stanr.com
Abstract
A model of stock market dynamics is analyzed using a new approach to uncertainty
treatment. The problem of uncertainty is formulated in deterministic way, using
the differential inclusions as the main modeling tool. This results in the shape
of the reachable set for the model trajectory, namely the possible extreme
values of the stock demand and price. The results of example analysis are shown,
where the uncertainty consists in erroneous or false agent's information about
the actual demand. It is pointed out that while treating the uncertain
parameters as random ones we cannot obtain the real shape of the model reachable
set. This may affect financial planning decisions and our knowledge about the
dynamic properties of the stock market.
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