Here we present a share pricing model for Celgene Corporation (CELG). A preliminary model was obtained in September 2009 and covered the period from October 2008. This old model included the same indices as the current one: the price index of food at home (FH) and the index of housing (H). The most recent model uses the monthly closing price as of April 2011 and the CPI estimates published on April 14, 2011. The FH index leads by 6 months and the H index is synchronized with the CELG share price. Figure 1 depicts the evolution of the indices which provide the best fit model, i.e. the lowermost RMS residual error, between July 2008 and March 2011. The model is as follows:
CELG(t) = -1.87FH(t-6) + 2.86H(t-0) +4.21(t-1990) – 247.59
where CELG(t) is a share price in US dollars, t is calendar time.
The observed and predicted prices are depicted in Figure 2. The residual error is $3.91 for the period between July 2003 and March 2011. Since the dependence on time is weak ($4.2 per year) and the index of food at home had a spurt during the last four months ($7 since December 2010), one can expect a fall by $10 in the next half a year. We assume that the housing index is not going to grow fast.
Figure 1. Evolution of the price indices FH and H.
Figure 2. Observed and predicted CELG share prices.