Comparative analysis of Geometric Brownian motion model in forecasting FBMHS and FBMKLCI index in Bursa Malaysia

On April 17, 1999, the Kuala Lumpur Stock Exchange, today known as Bursa Malaysia, launched a new index called Syariah Index (SI) to facilitate participation in the equity investment in accordance with Islamic syariah´s principles. Syariah-based equity is basically shares of the company meeting the criteria of Islamic jurisprudence. Indices are used as a performance benchmark for portfolios such as mutual fund shares. The index is a device that allows investors to measure the performance of the group share of the market. This paper forecasts the FTSE Bursa Malaysia Hijrah Shariah (FBMHS) and FTSE Bursa Malaysia KLCI (FBMKLCI) index using the better model of Geometric Brownian motion in terms of volatility models and number of data. This paper shows that forecasting using log volatility and 4 week daily data gives accurate forecasting.