Forecasting Stock Prices

I was thinking that ...
>That was your first mistake!
Pay attention!
I was thinking that, since I get lots of e-mail asking me to investigate some scheme to predict stock prices umpteen days in the future, I should dig out that neat formula generated here, namely:
Magic Formula:      

Anyway, I generated a spreadsheet where you identify the stock, click a button to download the stock prices and specify some time period T and a range of stock prices (from P1 to P2) and it'll tell you the probability that the stock price will lie in this range.

>What's that r and s and ...?
In the formula?
Okay, if you decide to download weekly prices (and you have a choice of daily, weekly or monthly), the spreadsheet will calculate:

  • r = the Mean Return (either daily, weekly or monthly, obtained from the downloaded data)
  • s = the Standard Deviation (of the daily, weekly or monthly returns)
  • Po = the current (latest) closing price (obtained from the downloaded prices)
  • The Magic Formula and calculate the probability that the price will lie between P1 and P2.
The spreadsheet will display a chart like so
It shows the probability that the price is less than $P.
To get the probability that the price is between P1 and P2, we just subtract.
(Example: 75% - 30% = 45% is the probability that the price lies between $55 and $67.)

>And you believe this stuff? I mean, you're trying to predict the future and ...
Wait'll I check.

>Very funny. Haven't you done this kind of spreadsheet before?
I can't remember. Probably.

>I assume there's a spreadsheet.
Yes. It looks like this:

To download an Excel spreadsheet just RIGHT-click here and Save Target
... or (sometimes this works) just click on the picture of the spreadsheet.