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Markov Modelling of Indian Stock Market Prices with Reference to State Bank of India
Abstract
This paper provides a discrete-time Markov model to analyse the behaviour of stock market prices with reference to State Bank of India (SBI) which is one of the leading commercial banks in India. The analysis in the present paper is carried out on the basis of past three years daily data (reference period is from 14th January 2019 to 12th January 2022) of closing share prices of SBI. The transition states like ‘GAIN’ as the share price of SBI increase, ‘NO CHANGE’ when the share price remains unchanged, and ‘LOSS’ when the share price decrease is considered. This study has made an attempt to judge the accuracy of the prediction of Markov chain model. The study explored the initial probability vector (IPV) and the transition probability matrix (TPM) from the observed data. The steady state TPM, the expected number of transitions and the expected return time of different are discussed in the study. The decision-making activities linked with time to sell or purchase and number of shares to purchase or to sell can be made with this study.
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ISSN(P) 2350-0174

ISSN(O) 2456-2378

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