Predicting Share Price of Energy Companies: June-September 2009

Abstract

Previously, we have revealed the presence of a reliable linear dependence between share prices of energy-related companies and the difference between CPI and core CPI: any change in share prices is transmitted into a proportional change in this difference two and half months later. The difference itself is characterized by sustainable trends reigning over seven to twenty-year intervals. As a result, the link between the share prices and the difference allows predicting the former over longer intervals. Since mid-2008, the previously observed trend has been undergoing a transition to a new trend. Accordingly, one may formulate two principal problems: “What is the dependence between share price and CPI during the transition?” and “When and how can one determine the properties of the new trend?” Currently available information on the CPI allows predicting the share prices between June and September 2009.