Is Boston Scientific on rise?

Here we introduce the model for Boston Scientific (BSX). The price of this share is defined by the index housing (H - CUUR0000SAH) and that of nondurable goods (NDUR- CUUS0000SAN). The time lags of the share price behind the index of hosing and nondurables are 5 months and 3 months, respectively. All coefficients in the model below were obtained by minimizing the RMS prediction error. The model has been valid since 2009 and looks very stable to be used in the near future to predict the price.

Figure 1 depicts the overall evolution of the actual monthly close price (adjusted for dividends and split) for the period between June 2003 and December. The defining CPI components provide the best fit model between November 2009 and December 2010 and both have negative influence on the price. The best-fit 2-C model for BSX(t) is as follows:

BSX(t) = -1.42*H(t-5) – 2.92*NDUR(t-3) – 0.1(t-2000) + 638.7

There are two predicted curves in Figure 1. The read curve (“FORECAST”) represents a contemporary forecast of the share price on a 3 month horizon. The curve “PREDICTED” (black diamonds) is the genuine prediction shifted three months ahead in order to synchronise with the actual curve. Thus, the prediction leads the observed price by 3 months with the residual error of $1.85 for the period between June 2003 and December 2010.

Comparing the evolution of the observed and predicted prices since the start of modelling (2008) we have found that the model does predict the share price in the past and foresees at a three month horizon. The most recent period was also well described by the model. The through in November 2008 was well foreseen in advance with the following quick recover. The price fell to $5.8 in July 2010 and has been showing a slow recovery since. One may expect that the price will be growing in the first quarter of 2011. Because of the low start level one might expect a relatively high return.

Figure 1. Observed and predicted BSX share prices. A contemporary prediction is shown by red line (curve “FORECAST”). Black diamonds present the original line shifted 3 months ahead (curve “PREDICTED”).

No comments:

Post a Comment