Projected Levels of the DJIA at the end of 2019
The hypothesis chosen for an exploratory modelling project is, “The Dow Jones Industrial Average (DJIA) will reach 25,000 points by end 2019. The problem which the analysis seeks to solve is whether an investor should allocate his investments towards equities (which the DJIA measures) or other instruments, against the backdrop of a volatile financial market. If the level of the DJIA could be accurately determined, the investor would be able to make better informed decisions. Our analysis involved finding correlations among certain key inputs which we thought would impact the level of the DJIA. One particular input, the US GDP, showed the highest level of covariance with the DJIA. Subsequently, we made projections of how the DJIA would develop through Normal, Empirical and Exponential distributions. We found that for the projected quarter ending on 31 December 2019, the DJIA was at 24,301 points. This is slightly below, but still significantly in line with our hypothesis.