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How to predict financial markets using MS Excel

To calculate the probability of returns, normal distribution appears appropriate as the asset returns can take both positive and negative values. However, contrary to returns, the asset prices have a lower zero bound.

By Sameer Bhardwaj, ET Bureau |Updated: February 10, 2020, 06.02AM IST
Quantifying the chances of making money in the financial markets hold enormous significance for investors, traders, experts, and analysts. Such chances are influenced by statistical randomness due to the interaction of a large number of micro and macro factors. Mathematically, such chances are estimated using probability. Probability is the likelihood of happening of an event that takes a value between
optimum asset mix based on the risk appetite of the investors. However, such probabilities proves useful till the assumption of normal distribution holds. Any deviation from the normality assumption reduces the effectiveness of such analysis. Therefore, such statistical indicators should not be the only criteria for analysing investments and should be used in conjunction with other micro and macro factors.

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