Abstract:
The Brownian motion is a Mathematical concept that European botanist Robert
Brown introduced in 1827 to study the behavior of molecules. The Brownian
motion concept was transformed into many versions, and Geometric Brownian
Motion (GBM) and Geometric Fractional Brownian Motion (GFBM) are the latest
transformations of this concept. The GBM and GFBM are mathematical models
used to forecast the prices of stocks, commodities, etc. In this study, the GBM and
GFBM were tested to estimate the share prices of telecommunication industry
companies in Sri Lanka. The two sample companies were selected by
representing 18% of the population of the telecommunication industry group.
The five-year share prices were collected from sample companies: Sri Lanka
Telecom PLC and Dialog Axiata PLC. The two models were implemented by
estimating parameters such as the drift, the volatility, probability measurement
and the time interval. In addition, the Hurst component was generated by a
MATLAB program for GFBM. This study concluded that GBM is the most accurate
model for forecasting share prices of the telecommunication industry group
with minimum mean absolute percentage error (MAPE).
