Predicting ConocoPhillips and ExxonMobil stock price

Lately, I have published an article on the prediction of stock prices for COP and XOM - “Predicting ConocoPhillips and Exxon Mobil stock price”, Journal of Applied Research in Finance, v.2, 2009. (A draft version is available here.)

Abstract
Exxon Mobil and ConocoPhillips stock price has been predicted using the difference between core and headline CPI in the United States. Linear trends in the CPI difference allow accurate prediction of the prices at a five to ten-year horizon.
Key words: stock price, Exxon Mobil, ConocoPhillips, prediction, CPI
JEL classification: G1, E3

We continue modelling various stock prices and recently revisited XOM and COP. The general model can be rewritten in the following form:

sp(t)= A1S1(t+t1) + A2S2(t+t2) + A3t +A4

where sp(t) is the stock price at time t, A1 through A4 are empirical coefficients, S1 and S2 are components of headline CPI, t1 and t2 are time difference (negative or positive) between the change in the stock price and relevant changes in the CPI components. Term A3t is introduced to compensate linear trends observed in the difference between the components.

For ConocoPhillips and Exxon Mobil, more accurate empirical models are as follows:

Figure 1. Comparison of measured (open circles) and predicted (solid diamonds) stock prices of ConocoPhillips. The prediction is obtained from the following empirical relationship:

COP(t)= 3.41CF(t+2) - 7.17EC(t-5) + 7.22*(t-2000) + 145.76,

where CF(t+2) is the headline CPI less food lagged by one months behind COP(t), and EC(t-5) is the index for education and communication leading the COP(t) by five months. The explicit trend term 7.22*(t-2000) compensates the trend term in the difference between CF and EC. Standard deviation between the curves is $4.0 for the period between July 2003 and August 2009.

Figure 2. Comparison of measured (open circles) and predicted (solid diamonds) stock prices of ExxonMobil. The prediction is obtained from the following empirical relationship:

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Standard deviation between the curves is $3.27 for the period between July 2003 and August 2009.

These two models provide a good approximation of the price evolution and even predict the future price for XOM.