The Prices Prediction of Taiwan Stock via GM(1,1) Method

Abstract

Stock investment has become the tool for the majority of people who want to accumulate wealth through investment banking. However, due to it is difficult to master the ups and downs of the stock prices, investors often end in loss. How to use an effective and reasonable investment approach to protect capital safety and sell or temporarily stop buying when the stock market declines has become more important. Stock investors dream of maintaining or buying the stocks when the stock market goes up, and earn more money than lose money in the stock market. Prof. Deng purposed the grey system theory, which constructs correlation analysis and system modeling to the uncertainty of the system model and information integrity. Also, the methods of forecasting and decision-making are used to explore and understand the system. Originally, it was used in the field of automatic control, but this paper applies the grey system theory, to stock price forecasting. By using the closing prices of the first five weeks, we can forecast six week's closing price. Several stocks in 2011 are used as simulation predictions, and we found that the average errors are between 2% to 7%. Hence, by using the grey system theory, the new stock price prediction model can be established for investors.