What is Geometric Brownian Motion?

GBM is a continuous-time stochastic process where the logarithm of a price follows Brownian motion with drift � and volatility s. The price equation is dS = �S dt + sS dW, giving lognormal price distributions at any future time.

Why do stock prices follow a random walk?

The Efficient Market Hypothesis states that all publicly available information is already reflected in prices. Consequently, future price changes depend only on new, unpredictable information, producing martingale (random-walk) price behaviour.

What is the Minsky cycle?

Hyman Minsky's financial instability hypothesis describes how sustained prosperity breeds excessive risk-taking. The cycle runs: displacement ? boom ? euphoria ? overtrading ? panic ? crash ? recovery � a pattern visible in every major financial crisis.

Which trading strategy performs best here?

Over a 20�30 year horizon the Buy & Hold and Index Fund strategies consistently outperform active strategies after transaction costs. Day Trading generates high activity but usually underperforms due to randomness and costs. This matches decades of empirical evidence.

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🧪 Stock Market Geometric Brownian Motion

Simulate stock prices using Geometric Brownian Motion (GBM), test Buy & Hold, momentum, and value investing strategies, and explore market crash phases interactively.

Financial Models & Markets2DModerate60 FPS

⚙ Under the hood

This simulation models the behavior of stock prices based on geometric Brownian motion, a common approach in financial modeling. It demonstrates how asset prices can fluctuate randomly over time, influenced by factors like volatility and drift.

Geometric BrownianStock MarketBrownian Motion

2D · HTML5 Canvas 2D · 60 FPS target · runs fully client-side, no install