Simulating Dow Jones Index in the Future

Jan 2, 2008

Happy New Year 2008. Wishing you a prosperous year of 2008 and years after.

I was again playing with random numbers simulation and found everlasting properous years of Dow Jones Index in the future.

Bear in mind, this is just a rough simulation played to get rid of boredness in the first day of 2008.

The process is as follows:
  1. Gather Dow Jones Index daily prices since 1-Oct-1928 and calculate the mean and standard deviation from the daily log returns.
  2. Using NORMINV(rand(), cumulative mean, cumulative stdev), simulate the daily returns.
  3. Using Price n * (1 + simulated daily return), estimate Price until n equals to 1-Jan-2100.
That's it. Easy. The index is randomly simulated everyday until year 2100. Number of simulations: 24,004.


Can you see the heavenly index level at the end? Such an amazing number, aye? That's why people should be optimistic with the future of finance and investment as glorifying God. Dow Jones Index at 31 Dec 07 is 13,264.82. Is it going to be 3,000,000 in 2100???

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Closer look of some scenarios

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