Predictive Models for the Stock Price of Ford

1 Introduction and Overview

1. About the Company

Ford Motor Company, a global automotive industry leader based in Dearborn, Michigan, manufactures or distributes automobiles across six continents. With about 164,000 employees and about 70 plants worldwide, the company’s automotive brands include Ford and Lincoln. In recent years, Ford has continued to work to find affordable solutions to create fuel-efficient products to meet the needs of fuel economy improvements. Technologies like EcoBoost, direct injection of gasoline or diesel fuel, six-speed transmissions, and hybrid and plug-in hybrid powertrains deliver true power of choice to drivers everywhere.

1. The suggestion of possible models

We are interested in the trend and the prediction of the stock price of Ford. Hence the independent variable is the stock price of Ford. After going through the annual reports of Ford and other business statements available, we find that models and factors (independent variables) given below could be used as possible models to analyze the time series of the stock price of Ford qualitatively and quantitatively.

1. Index Structure

There are three main areas of influence that move a stock’s price up or down. They are fundamentals, sector changes, and market swings.

Fundamentals Clearly, the most direct influence on a stock’s price is a change in the economic fundamentals of the business. The revenues and profits give investors an intuitive message about how well the company performs to benefit the shareholders. Here, we suggest four factors that might influence the fundamental parts and in turn influence the stock price of Ford.

1. 10-yr T-note - CBOE Interest Rate 10-Year T-Notes

Clearly, changes in the interest rate affect the behavior of consumers and business, and the stock market is also affected. If a company is seen as cutting back on its growth spending or making less profit - either through higher debt expenses or less revenue from consumers - then the estimated

amount of future cash flows will drop. All else being equal, this will lower the price of the company's stock.

1. Oil Price - Monthly crude Oil Price

As is known to all, any slightest variation in the prices of crude oil can have a notable influence on the economy worldwide. In addition, when the price of the oil skyrockets, people would tend to purchase those autos with fuel-efficiency. Thus, we reasonably guess that the oil price imposes impact on the stock price of Ford.

1. Rubber Price - Monthly rubber price (US cents per Pound)

Metal Price - Commodity Metals Price Index Monthly Price includes Copper, Aluminum, etc.