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Modeling share prices of banks and bankrupts

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  • Kitov, Ivan

Abstract

Share prices of financial companies from the S&P 500 list have been modeled by a linear function of consumer price indices in the USA. The Johansen and Engle-Granger tests for cointegration both demonstrated the presence of an equilibrium long-term relation between observed and predicted time series. Econometrically, the pricing concept is valid. For several companies, share prices are defined only by CPI readings in the past. Therefore, our empirical pricing model is a deterministic one. For a few companies, including Lehman Brothers, AIG, Freddie Mac and Fannie Mae, negative share prices could be foreseen in May-September 2008. One might interpret the negative share prices as a sign of approaching bankruptcies.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21369.

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Date of creation: 13 Mar 2010
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Handle: RePEc:pra:mprapa:21369

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Keywords: share price; modeling; CPI; prediction; the USA; bankruptcy;

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  1. David F. Hendry & Katarina Juselius, 2001. "Explaining Cointegration Analysis: Part II," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 1), pages 75-120.
  2. Kitov, Ivan & Kitov, Oleg, 2008. "Long-term linear trends in consumer price indices," MPRA Paper 6900, University Library of Munich, Germany.
  3. Ivan O. KITOV & Oleg I. KITOV, 2009. "Sustainable Trends In Producer Price Indices," Journal of Applied Research in Finance Bi-Annually, ASERS Publishing, vol. 0(1), pages 43-51, June.
  4. Kitov, Ivan, 2009. "ConocoPhillips and Exxon Mobil stock price," MPRA Paper 15334, University Library of Munich, Germany.
  5. Kitov, Ivan, 2009. "Does economics need a scientific revolution?," MPRA Paper 14476, University Library of Munich, Germany.
  6. Kitov, Ivan & Kitov, Oleg, 2009. "A fair price for motor fuel in the United States," MPRA Paper 15039, University Library of Munich, Germany.
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Cited by:
  1. Ivan Kitov, 2012. "Cross comparison and modelling of Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Franklin Resources," Papers 1212.1661, arXiv.org.
  2. Ivan Kitov, 2012. "ConocoPhillips' share price model revisited," Papers 1204.5171, arXiv.org.

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