Simulation of Korea Composite Stock Price Index (KOSPI) for the First 20 Years in the 21st Century Using Random Walk

Shaomin Yan, Guang Wu

2022

Abstract

The Korea Composite Stock Price Index (KOSPI) can be regarded as a representative of the economic development not only in South Korea but also in the emerging markets. Thus, the KOSPI and its derivatives are the objective of many studies with models from neural network model to stochastic model, whose computation can be considered as a part of the computational finance, in particular with the Monte Carlo simulation. In this study, we apply the random walk model to simulate KOSPI for the first 20 years in the 21st century with division into five sub-periods because whether or not KOSPI follows a random walk is closely related to the efficient market hypothesis (EMH). At first, we use the random walk in the 1/–1 format to simulate KOSPI in a simplified format for 2020, and then we use the random walk in the decimal format to simulate the real-life KOSPI for five different periods with increment of five-year data each. The simulation is done using the Monte Carlo algorithm to generate random numbers with 100,000 seeds for each sub-period of KOSPI simulation. The results show that the simulation can fit for short periods of time and can follow KOSPI for a longer period of time.

Paper Citation

in Harvard Style

Yan S. and Wu G. (2022). Simulation of Korea Composite Stock Price Index (KOSPI) for the First 20 Years in the 21st Century Using Random Walk. In Proceedings of the 1st International Conference on Public Management, Digital Economy and Internet Technology - Volume 1: ICPDI; ISBN 978-989-758-620-0, SciTePress, pages 613-618. DOI: 10.5220/0011753200003607

in Bibtex Style

@conference{icpdi22,
author={Shaomin Yan and Guang Wu},
title={Simulation of Korea Composite Stock Price Index (KOSPI) for the First 20 Years in the 21st Century Using Random Walk},
booktitle={Proceedings of the 1st International Conference on Public Management, Digital Economy and Internet Technology - Volume 1: ICPDI},
year={2022},
pages={613-618},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0011753200003607},
isbn={978-989-758-620-0},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 1st International Conference on Public Management, Digital Economy and Internet Technology - Volume 1: ICPDI
TI - Simulation of Korea Composite Stock Price Index (KOSPI) for the First 20 Years in the 21st Century Using Random Walk
SN - 978-989-758-620-0
AU - Yan S.
AU - Wu G.
PY - 2022
SP - 613
EP - 618
DO - 10.5220/0011753200003607
PB - SciTePress