Forecasting Equity Price: Challenges of Model Fit

We used vector autoregression followed by Monte Carlo simulation as a means of modeling equity pricing data, then back-tested our findings against known pricing. We selected LLY as our stock for both methods and used pricing data from December 2015 through November 2020. In fairness, there were no specific criteria used in selecting LLY as our test subject, but in general, pricing data ranged from approximately $75 to $160 a share, and the mean monthly ROI was 1.1 percent, while annualized volatility was calculated to be 21.0 percent.