According to , the model for Ball Corporation (BLL) is defined by the index of motor vehicle maintenance and repair (MVR- CUUR0000SETD) and that of communication (CO- CUUR0000SAE2). The former CPI component leads the share price by 13 months and the latter one leads by 2 months. These defining components provide the best fit model between August 2009 and June 2010.
So, the best-fit 2-C model for BLL(t) is as follows:
BLLB(t) = 2.66MVR (t-13) – 5.84(t-2) - 20.44(t-2000) + 321.46
The predicted curve in Figure 1 leads the observed price by 2 months with the residual error of $2.42 for the period between July 2003 and June 2010. In other words, the price of a BLL share is completely defined by the behaviour of the two CPI components.
The model does predict the share price in the past and foresee a significant fall in the near future. This drop will be in line with the overall fall in the S&P 500 in 2010.
Figure 1. Observed and predicted BLL share prices. Black diamonds present the original forecast shifted 2 months ahead.
Kitov, I. (2010). Deterministic mechanics of pricing. Saarbrucken, Germany, LAP Lambert Academic Publishing.