Applications of linear ordinary differential equations and dynamic system to economics - an example of Taiwan stock index TAIEX

DOI10.1504/IJDSDE.2017.085824MaRDI QIDQ2289502zbMATH OpenOpenAlexFDO

Authors Nien-Ping Chen, Meng-Rong Li, Tsung-Jui Chiang-Lin, Young S. Lee, Daniel Wei-Chung Miao

Publication date 23 January 2020

Published in International Journal of Dynamical Systems and Differential Equations (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1504/ijdsde.2017.085824

zbMATH Keywords

Newton's law of coolingnonlinear dynamic systemordinary differential equationstock index closing priceTaiwan stock exchange capitalisation weighted stock index

Mathematics Subject Classification ID

Dynamical systems in optimization and economics (37N40) Auctions, bargaining, bidding and selling, and other market models (91B26) Special types of economic markets (including Cournot, Bertrand) (91B54) Economic dynamics (91B55)

Review text

Summary: Mean reversion of stock price is an observed phenomenon in finance. It is similar to the concept of Newton's law of cooling. Three models of ordinary differential equation are derived from the concept and solved by dynamic integration. The models are applied to the daily closing price of Taiwan Stock Exchange Capitalisation Weighted Stock Index. Empirical study shows that the models have good fits and forecasts although errors appear during the dynamic forecasting process. The applicability of the models and future modification are also discussed.

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• Applications of parameterized nonlinear ordinary differential equations and dynamic systems: an example of the Taiwan stock index

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