ConocoPhillips' share price model revisited

TL;DR

This paper revisits and validates a statistical link between ConocoPhillips' stock price and US CPI differences, extending the model with advanced components for improved long-term price prediction.

Contribution

It introduces enhanced models incorporating additional CPI and PPI components, significantly improving prediction accuracy for ConocoPhillips' stock prices.

Findings

Confirmed the original CPI-based stock price relationship.

Developed advanced models with lower errors and better statistical properties.

Achieved accurate long-term price forecasts using CPI trend analysis.

Abstract

Three years ago we found a statistically reliable link between ConocoPhillips' (NYSE: COP) stock price and the difference between the core and headline CPI in the United States. In this article, the original relationship is revisited with new data available since 2009. The agreement between the observed monthly closing price (adjusted for dividends and splits) and that predicted from the CPI difference is confirmed. The original quantitative link is validated. In order to improve the accuracy of the COP price prediction a series of advanced models is developed. The original set of two major CPIs is extended by smaller components of the headline CPIs (e.g. the CPIs of motor fuel and housing energy) and several PPIs (e.g. the PPIs of crude oil and coal) which may be inherently related to ConocoPhillips and other energy companies. These advanced models have demonstrated much lower modeling errors with better statistical properties. The earlier reported quasi-linear trend in the CPI difference is also revisited. This trend allows for an accurate prediction of the COP prices at a five to ten year horizon.