A preliminary model for Cephalon share

After the model for Altero Corporation, we present a share pricing model for Cephalon (CEPH). The most recent model uses the monthly closing price as of April 2011 and the CPI estimates published on April 14, 2011. The tenants' and household insurance index (THI) leads by 2 months and the index of prescription drugs (PDRUG) leads by 9 months the CEPH share price.  The latter index might be directly related to Cephalon product. Figure 1 depicts the evolution of the indices which provide the best fit model, i.e. the lowermost RMS residual error, between November 2010 and March 2011.  The model is as follows:
CEPH(t) = -3.94THI(t-2) + 1.61PDRUG(t-9) – 10.04(t-1990) + 120.83
where CEPH(t) is a share price in US dollars, t is calendar time.
Both models are depicted in Figure 2. The residual error is of $5.00 for the period between July 2003 and March 2011.  2009. Notice that the PDRUG index has been growing at a high rate since the beginning and any fluctuation in this index has been directly mapped into the price, which is characterized by high volatility. The THI index has been rising steadily but slowly. 
Figure 1. Evolution of the price indices THI and PDRUG.
Figure 2. Observed and predicted CEPH share prices.

No comments:

Post a Comment