Stochastic Modeling for the Analysis and Forecasting of Stock Market Trend using Hidden Markov Model
Gulbadin Farooq Dar, Tirupathi Rao Padi, Sarode Rekha, Qaiser Farooq Dar
Asian Journal of Probability and Statistics · pp. 43–56 · Published 22 Jun 2022
10.9734/ajpas/2022/v18i130436Abstract
The HMM is generally applied to forecast the hidden system of observation data. In this paper, we deal with the development of HMM for a proper understanding of finance variables in the stock market. Formulation of relationships between and within both the changing share values of Housing Development Finance Corporation Bank Limited (HDFC Bank Ltd) as visible/observed states influenced by the indicators of S&P Bombay Stock Exchange Sensitive Index (Sensex) as invisible/influencing states. Stochastic modeling with hidden Markov models is carried out for exploring various parameters of the model. Mathematical derivations for all the required statistical measures are obtained using the method of moments for the proposed probability distribution. Deducing mathematical formulation of initial probability vector, transition and observed probability matrices were carried out with the empirical data sets. Probability distribution for visible states of various lengths is obtained. It is observed from the empirically analysis that there is the maximum likelihood of rising the share prices of HDFC bank in consecutive two days. Furthermore, an attempt is made to estimate the long-run steady-state behavior of both the SENSEX and HDFC Bank share prices. The share value of HDFC bank will be on rising state from the 19th day onwards and it may be recommended for good investment choice for the long run. The findings of these studies will be valid for effective decision-making in portfolio management.
References (23)
- 1 The architecture of complex weighted networks [DOI]
- 2 A Tutorial on Hidden Markov Models and Selected Applications in Speech Recognition [DOI]
- 3 Dual u-net with resnet encoder for segmentation of medical images
- 4 Stock market prediction system with modular neural networks [DOI]
- 5 Computational statistics & data analysis
- 6 1997 IEEE International Conference on Systems, Man and Cybernetics [DOI]
- 7 Stock market forecasting using hidden Markov model: a new approach [DOI]
- 8 Multivariate Stochastic Volatility Models: Bayesian Estimation and Model Comparison [DOI]
- 9 Stock market prediction using Hidden Markov Models [DOI]
- 10 Regime Shifts: Implications for Dynamic Strategies (corrected) [DOI]
- 11 Hidden Markov Model for Stock Trading [DOI]
- 12 Hidden Markov Model for Stock Selection [DOI]
- 13 Hidden Markov Models (HMMs) and Security Applications [DOI]
- 14 Probabilistic Methods in Estimation and Prediction of Financial Models
- 15 Estimation and testing nonhomogeneity of Hidden Markov model with application in financial time series [DOI]
- 16 Testing for the number of states in hidden Markov models [DOI]
- 17 Visualization, Economic Complexity Index, and Forecasting of South Korea International Trade Profile: A Time Series Approach [DOI]
- 18 Markov Financial Model Using Hidden Markov Model
- 19 Markov modulated jump-diffusions for currency options when regime switching risk is priced [DOI]
- 20 Analysis and Comparison of Bitcoin and S and P 500 Market Features Using HMMs and HSMMs † [DOI]
- 21 Bulletin of the American Mathematical Society [DOI]
- 22 International Journal of Financial Studies [DOI]
- 23 Decoding Chinese Stock Market Returns: Three-State Hidden Semi-Markov Model [DOI]
Cited by 17
Shibo Yang, Jianxuan Xin, Qiang Ye · 2025
Doreen Laurent Rutagumirwa · European Journal of Applied Science, Engineering and Technology · 2025
Shibo Yang, Jianxuan Xin, Qiang Ye · 2025
Aldan Maulana Hamdani, Nur Iriawan, Irhamah · 2025 8th International Seminar on Research of Information Technology and Intelligent Systems (ISRITI) · 2025
Aldan Maulana Hamdani, Nur Iriawan, Irhamah Irhamah · Jurnal Gaussian · 2025
Showing 5 of 17 known citations — external sources report more than can currently be individually listed.
Related research
- Dynamics of Area Change under Commercial Crops in Tamil Nadu — shares topic coverage
- Generating Synthetic Monthly Net Radiation Data Conditioned on Wind Speed — shares topic coverage
- Assessing Export Competitiveness and Trade Patterns of Fresh and Chilled Gherkins from India — shares topic coverage
- Geospatial Analysis of Land Use/Cover Dynamics in Awka Metropolis, Nigeria: A Sub-pixel Approach — shares topic coverage
- Linear Least Square Method for the Computation of the Mean First Passage Times of Ergodic Markov Chains — shares topic coverage
Article metrics
Real usage data collected on this platform.
11
Page views
0
PDF downloads
1
Outbound clicks
17
Citations
Views over time
Views by country
Approximate, from request IP at view time — not citizenship or institution. Countries with fewer than 5 views are grouped as "Other".
Traffic sources
Referring site, by host.
Views and downloads exclude known bots/crawlers. Citations combines this platform's own DOI-resolved index with each external source's own reported total — see Cited by above for individually listed citing works. Last refreshed 0 seconds ago.