Page 83 - programme book

ST-016
Control Chart for Monitoring Stock Price and Trading Volume in
Malaysia Stock Market

Tan Zong Ming 1, a) , Wong Voon Hee 1, b) and Pan Wei Yeing 1, c)

1 Department of Mathematical and Actuarial Sciences, Lee Kong Chian Faculty of Engineering & Science,
Universiti Tunku Abdul Rahman, 43000 Kajang, Selangor, Malaysia.

a) Corresponding author: tanzm@utar.edu.my
b) wongvh@utar.edu.my
c) panwy@utar.edu.my

Abstract. Traditional statistical control charts are rarely used as a tool to monitor the stock trading and
portfolio analysis due to its capability of providing a buying, selling or holding signal to the investor.
Besides that, the normality assumption for a control chart is always violated due to the share prices
and trading volumes being highly correlated. To overcome this problem, the auto regressive integrated
moving average (ARIMA) model can be integrated into the control chart scheme. In this paper, a
moving limit ARIMA control scheme is developed to monitor both stock price and trading volume at
the same time. A real-life stock exchange data has been used to demonstrate the effectiveness of the
proposed control scheme as compared with the performances of the volume-weighted moving average
(VWMA) and relative strength index (RSI) charts. The proposed control scheme shows better
performance compared to VWMA and RSI charts.

Keywords: ARIMA model, control chart, stock price, trading volume, volume-weighted moving
average.

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