Simulation of French CAC40 Index for the First 20 Years in the 21st Century with Random Walk Model

DOI

10.2991/978-94-6463-042-8_152How to use a DOI?

Keywords

CAC40 index; random walk; simulation; finance and trade; stock market

Abstract

The French CAC40 index represents the most important index for the French stock market, and is composed of 40 most significant stocks in the Euronext Paris. Thus, the behavior of the CAC40 index is the subject of numerous studies, of which the efficient market hypothesis (EMH) is a hot topic. One way to prove EMH is to conduct statistical tests on the given stock index to determine whether or not a stock index meets the random walk. Apart from statistical tests, we prefer to use the random walk model to simulate a stock index because such results are more visible and convincing. In this study, we conduct two types of random simulations, (i) to use the classical random walk, which is in the 1/–1 form, to simulate the CAC40 in a simplified form for 2020, and (ii) to use the random walk in decimal form to simulate the real-life CAC40 for the first 20 years in the 20th century stratified into five segments with increment of five years for each. The results show that the simulations in theory have a chance to perfectly simulate the CAC40, but this theoretical perfect simulation is limited by the ability of the Monte Carlo algorithm in generation of random numbers.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Shaomin Yan
AU  - Guang Wu
PY  - 2022
DA  - 2022/12/29
TI  - Simulation of French CAC40 Index for the First 20 Years in the 21st Century with Random Walk Model
BT  - Proceedings of the 2022 International Conference on mathematical statistics and economic analysis (MSEA 2022)
PB  - Atlantis Press
SP  - 1064
EP  - 1068
SN  - 2352-538X
UR  - https://doi.org/10.2991/978-94-6463-042-8_152
DO  - 10.2991/978-94-6463-042-8_152
ID  - Yan2022
ER  -