Stocks & Commodities V. 25:2 (44-48): Sidebar: Models of stock price behavior by Radha Panini
MODELS OF STOCK PRICE BEHAVIOR
1. Brownian model (BM)
St = S0 + µt + •Wt
where St is the stock price at time t, S0 is the stock price at time 0, µ, and • are constants and Wt is a Brownian motion. Since Wt can take negative values, it is possible for stock prices to be negative!