A two-year revision: cross comparison and modeling of Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Franklin Resources

Kitov, Ivan (2014): A two-year revision: cross comparison and modeling of Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Franklin Resources.

Abstract

Approximately two years ago we presented results of price modeling and extensive statistical analysis for share prices of five banks: Bank of America (BAC), Franklin Resources (BEN), Goldman Sachs (GS), JPMorgan Chase (JPM), and Morgan Stanley (MS). Using monthly closing prices (adjusted for splits and dividends) as a proxy to stock prices, we estimated the best fit (LSQ) quantitative price models based on the decomposition into two defining consumer price indices selected from a large set of various consumer price indices (CPIs). It was found that there are two pairs of similar price models BAC/MS and GS/JPM, with a standalone model for BEN. Using five estimated models we formulated a procedure for selection the company with the highest return depending on the future evolution of defining CPIs. Here, we revisit the original models with new data for the period between October 2012 and February 2014. All revised models are practically the same as the original ones that validates our approach to price modeling. For the pair Bank of America and Morgan Stanley, we correctly predicted that both prices would rise synchronously (the observed return since October 2012 is approximately 75%) as driven by a higher rate of increase in the price index of owner’s rent of primary residence and rent of shelter. Goldman Sachs and JPMorgan Chase have risen by ~40% in line with a higher rate of growth in the index of food and beverages relative to two rent related indices. Franklin Resources has risen by only 25% as defined by a different pair of CPIs. All five models are robust and do not demonstrate any signs of upcoming failure in the near future. They may be used for stock market analysis.

• Item Type: MPRA Paper
• Language: English
• Keywords: share price, modeling, CPI, prediction, USA, bankruptcy
• Subjects: E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G3 - Corporate Finance and Governance

References

Kitov, I. (2009). Predicting ConocoPhillips and Exxon Mobil stock price, Journal of Applied Research in Finance, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. I(2(2)_ Wint), 129-134.

Kitov, I. (2010). Modeling Share Prices of Banks and Bankrupts, Theoretical and Practical Research in Economic Fields, Association for Sustainable Education, Research and Science, vol. 0(1), 59-85, June.

Kitov, I. (2012) Cross comparison and modelling of Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Franklin Resources. In: Papers 1212.1661, arXiv.org, http://arxiv.org/pdf/1212.1661.

Kitov, I. and O. Kitov (2008). Long-Term Linear Trends In Consumer Price Indices, Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 3(2(4)_Summ).