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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